KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Valere Nyaboke, Cliffe Dekker Hofmeyr
prescribed for different categories of virtual‑asset business. The detailed, stablecoin‑specific regulatory framework – covering matters such as reserve composition and custody, asset‑liability management, disclosures and attestation, and any redemption‑at‑par mechanisms – will be established through forthcoming regulations.
In legal proceedings, an allegation of fraud requires a heightened standard of proof. This standard is stricter than the usual “balance of probabilities” applied in civil cases, demanding more compelling evidence. Although it does not reach the level of the criminal standard of “beyond a reasonable doubt”, it neverthe - less requires a significantly more persuasive demon - stration of fraudulent conduct. 12.2 Areas of Regulatory Focus Regulators prioritise investigating and taking action against individuals or businesses that conduct regu - lated financial activities without the required licences, as well as those that charge excessive interest on their financial products. Such fraudulent or improper practices can cause significant harm to customers, including financial losses and increased vulnerability. Examples of enforcement activities include the fol - lowing. • Issuing cease‑and‑desist orders – regulators typi - cally require unlicensed entities to immediately stop their operations. • Imposing fines – regulators may levy financial pen - alties on individuals or businesses that carry out regulated activities without the appropriate licens - ing. • Criminal prosecutions – regulators can collaborate with law enforcement agencies to pursue criminal charges against persons engaged in unlicensed regulated activity. • Public warnings – regulators often release state - ments or alerts to inform consumers about unli - censed entities or fraudulent schemes they have identified. 12.3 Responsibility for Losses In Kenya, a fintech service provider may be held responsible for customer losses in various circum - stances, primarily if the loss or damage arises from fraudulent actions, regulatory violations, breach of contract, or inadequate security measures by the provider. Specifically, a provider can be liable:
11. Open Banking 11.1 Regulation of Open Banking
Kenya currently does not have specific open banking regulations. As a result, the sharing of personal finan - cial data with third parties is governed by the Data Protection Act. However, in its National Payments Strategy 2022–2025, the Central Bank of Kenya has indicated its commitment to developing appropriate API standards and encouraging secure data‑sharing practices. The adoption of secure APIs by digital financial ser - vice providers would streamline connectivity between third‑party entities – primarily fintechs offering special - ised solutions – and traditional financial institutions. Such integration would enhance both the efficiency and security of Kenya’s financial sector. 11.2 Concerns Raised by Open Banking While there are no regulations that specifically address open banking, banks and technology providers are still required to comply with the Data Protection Act; see 2.11 Implications of Additional, Non‑Financial Services Regulations . 12. Fraud 12.1 Elements of Fraud The key elements of fraud are: • a false representation of an existing fact; • made with the intention that another party should rely on it; and • resulting in that party suffering damage.
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