Foreign Exchange Regulations in Kenya: CBK Rules for Businesses and Investors

Foreign exchange regulations in Kenya determine who may deal in foreign currency, how payments move between residents and non-residents, and what the Central Bank of Kenya (CBK) can require of the banks and other dealers that carry out those transactions. For businesses that import, export, receive foreign investment or borrow abroad, understanding the foreign exchange regulations in Kenya is essential. It is also easy to misdescribe: outdated guidance still refers to a restrictive exchange control regime, but the operative framework today is a licensing and conduct regime administered by the CBK.

The legal framework for foreign exchange regulations in Kenya

Foreign exchange dealing is regulated by Part VIA of the Central Bank of Kenya Act, headed “Regulation of Foreign Exchange Dealings” and covering sections 33A to 33M. That Part was inserted by Act No. 10 of 1995. There is no separate Foreign Exchange Act. Subsidiary legislation, including the Central Bank of Kenya (Foreign Exchange Business) Regulations, 2007, and CBK directions supplement the Act.

Who may deal in foreign exchange

Section 33A provides that, subject to a limited power of the CBK to permit otherwise, no person shall transact foreign exchange business in Kenya except an authorised dealer. Contravening that rule is an offence punishable on conviction by a fine not exceeding five hundred thousand shillings, imprisonment for up to three years, or both. The Act defines an authorised dealer as an authorised bank, authorised bureau, authorised mortgage finance company, authorised money remittance provider or authorised microfinance bank licensed by the CBK under section 33B.

A foreign exchange bureau is defined in the Act as a company incorporated in Kenya whose liability is limited by shares and whose main object is buying and selling foreign currency. A business that wants to offer currency exchange or cross-border remittance services, rather than simply use them, must work out at the outset whether it needs a bureau licence, a money remittance authorisation or a banking licence, because each regime has different requirements. See our guide to CBK forex bureau licensing.

Payments between residents and non-residents

Section 33H provides that, except with the permission of the CBK, every payment made in Kenya to or for the credit of a person outside Kenya, or made outside Kenya to or for the credit of a person in Kenya, and every payment other than for a current transaction between a resident and a non-resident, shall be effected through an authorised bank or an authorised microfinance bank. A contravention is an offence carrying the same penalty as section 33A. In practice this means that cross-border payments for imports, exports, loans, investment and dividends should run through the company’s bank account with an authorised dealer, supported by invoices or contracts.

Duties of authorised dealers and CBK powers

Section 33E requires authorised dealers to keep the books and records the CBK specifies, maintain the levels of foreign currency assets or liabilities it specifies, follow its requirements on foreign currency accounts, and adopt measures it requires to improve management or business methods. Section 33F allows CBK inspections, and section 33G lets it advise and direct dealers whose business is conducted contrary to Part VIA or detrimentally to the public. Part VIA also contains a power to impose restrictions to meet treaty obligations (section 33I), a power to grant permissions (section 33J) and a power to issue instructions or directions (section 33K). Section 33L sets a general penalty for offences under the Part for which no other penalty is provided: a fine of up to five hundred thousand shillings, imprisonment for up to three years, or both.

Reporting, repatriation and external borrowing

Businesses often ask about export proceeds repatriation periods, foreign investment reporting and registration of foreign loans. Because these requirements are set by CBK directions and other instruments that change more often than the statute, we do not state fixed periods or forms here. Before receiving foreign equity, drawing a cross-border loan or relying on a hedging product, ask your authorised dealer bank, and check the CBK’s current published requirements, whether any reporting, registration or approval step applies. Keep the commercial documents that support each transaction, including invoices, loan and investment agreements and board approvals.

Trade finance and hedging

Importers and exporters use letters of credit, documentary collections and forward contracts to manage payment and exchange rate risk. Forwards fix a future rate and give certainty on the shilling cost of a foreign currency obligation. Hedging should relate to a genuine commercial exposure, and a business should be able to point to the invoice, contract or loan being hedged. Confirm that the bank offering the product is authorised to provide it, because licences differ in what they permit.

Compliance and anti-money laundering

Using unlicensed money changers or informal value-transfer networks for foreign currency exposes a business to criminal liability under section 33A and to anti-money laundering risk. Our guide to sanctions compliance for Kenyan businesses explains the related Financial Reporting Centre obligations. A sound internal policy requires that all foreign currency transactions are documented, invoiced consistently with the underlying deal, and conducted through the company’s designated bank accounts. Review the policy against the CBK’s current published requirements at least annually.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.