Trust Accounts for Payment Service Providers in Kenya

For a Kenyan payment service provider that holds customer money, the trust account is the single most closely supervised part of the business. The National Payment System Regulations, 2014 require customer funds to be ring-fenced in a trust, and the draft National Payment System Bill, 2026 would restate and tighten those rules. This article sets out what the Regulations require today, what happens to the trust if authorisation is revoked, and what the Bill proposes.

What Regulation 25 requires

Regulation 25(3) says a payment service provider shall establish a Trust and ensure that all monies received are held in a Trust Fund. The balances must never be less than what is owed to customers. The provider must not transfer the funds to its own operating account, and must not commingle them with the funds of anyone other than the payers and payees on whose behalf they are held. The funds must be diversified and placed in commercial banks licensed under the Banking Act or in Government of Kenya securities. Regulation 25(2) adds that governance arrangements must include a broad-based board of trustees of people who meet the fit and proper criteria in the Second Schedule, and a separate business unit, with separate management and books of account, for the payment services.

The trust deed

Regulation 26(1) sets the minimum content of the trust deed. It must cover:

• the principal characteristics of the service provided under the trust;
• how the fund is held and invested;
• the procedure for nominating trustees, and their duties, responsibilities and extent of liability;
• discontinuation or termination of the trust and the handling of the fund afterwards;
• handling of dormant accounts and the accounts of deceased persons;
• the rights of system participants and beneficiaries;
• applicable law and dispute resolution;
• where the trustee is a company, the duties of the management company and key particulars of the arrangement; and
• the use of income generated from the trust fund.

Any proposed change to the trust deed must be submitted to CBK for approval (Regulation 26(2)). CBK also assesses the suitability of trustees at the application stage (Regulation 5(4)(d) and Regulation 8), and where the trustee is a corporate entity, it assesses that entity’s directors and senior management.

How much can sit in one bank

Regulation 25(4) requires the funds to comply with the Fourth Schedule limits, which are set by the size of the trust. Below KES 100 million, the funds may sit with a strong rated bank. Above KES 100 million, no more than 25 per cent of the total may be held in any single bank, and the provider must use at least two strong rated banks. The Schedule does not define “strong rated”, so a provider should ask CBK how it measures that. Income earned on the trust funds must be used in accordance with trust legislation in consultation with CBK, or donated to a public charitable organisation for public charitable purposes (Regulation 25(5)).

Reporting and audit

A provider must keep records of every electronic transfer for at least seven years (Regulation 29(1)). Within three months of 31 December each year it must submit audited financial statements covering its activities in Kenya, separate audited financial statements for the payment service provider and for the trust accounts, and an independent system security audit report (Regulation 29(3)). CBK may inspect the trust fund and its books at any time (Regulation 33(1)(b)). Regulation 27(2)(e) also requires separate records and accounts for e-money activities.

Revocation: the trustees carry the shortfall

The trust matters most when something goes wrong. Regulation 10(1)(o) and (p) allow CBK to suspend or revoke an authorisation if the trust account is not managed consistently with trust law and the Regulations, or if trustees fail to act in the interests of the beneficiaries. On revocation or suspension, CBK takes over control of the business to safeguard and distribute the money in the Trust Fund (Regulation 10(5)(b)), notifies the institution holding the funds to stop dealing with them until CBK directs (Regulation 10(7)(c)), and may appoint any person, including another payment service provider, to distribute the balances (Regulation 10(8)). Regulation 10(9) then provides that any shortfall in the Trust Fund is recoverable directly from each Trustee. Anyone asked to act as a trustee should read that sentence carefully before accepting, and the company should consider whether trustee indemnity or insurance cover is available.

What the Bill proposes

Part VIII of the draft Bill (clauses 36 to 40) rewrites the regime. Clause 36 requires each issuer of electronic money and provider of electronic wallets to hold all customer money in a trust account at a licensed bank or microfinance bank. Trust money may be invested by the trustees only in Kenya Government securities or held in interest-bearing trust accounts. Balances may never fall below what is owed to customers, and the provider must give the bank customer information showing the number of beneficiaries and the aggregate amount attributable to them. The Fourth Schedule limits what may be held in a single bank to the higher of KES 500 million or 25 per cent of the trust monies.

Clauses 37 to 39 add protections the Regulations do not state in terms: trust money may not be moved to the provider’s own operating account or commingled; it may be used only to discharge customer liabilities, repay customers or for any purpose CBK gazettes; it may not be attached, assigned or transferred to satisfy any debt or claim; and it may not be used to settle the provider’s liabilities in insolvency. Clause 36(1) applies to e-money issuers and wallet providers, while clause 36(7) says each payment service provider shall operate trust accounts in accordance with the section, with requirements to be prescribed. How far the trust duty reaches beyond those two categories is therefore unclear on the draft. The Bill is not law, and our article on its licences and capital explains the wider changes.

Practical steps

Draft the trust deed against Regulation 26 before the application goes in, because the funds-management section of the business plan must show how users’ funds are protected on failure or insolvency; our checklist for the CBK application file lists it. Decide early whether your product is e-money, since that triggers the transaction limits and redemption rules explained in our note on e-money issuers and electronic retail PSPs. Our overview of PSP licensing in Kenya covers the process, and our financial services team at Clay & Associates Advocates can draft and review the trust deed. For the wider duties that follow authorisation, see our note on post-authorisation obligations.

Sources: National Payment System Regulations, 2014, regulations 5, 8, 10, 25, 26, 27, 29 and 33 and the Fourth Schedule (CBK); The National Payment System Bill, 2026, clauses 36 to 40 and the Fourth Schedule (CBK); National Payment System Act, 2011 (Cap. 491A).

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.