KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Sara Ndei, Cliffe Dekker Hofmeyr incorporating Kieti Law LLP
2.6 Jurisdiction of Regulators It is common for more than one regulator to have jurisdiction over a fintech in Kenya. The jurisdic - tion of each regulator will be governed by the applicable enabling legislation. For example, a mobile network provider would be subject to regulation by: • the CA, which regulates the provider’s core telecommunications services; • the CBK, which oversees the provider’s mobile payment services, money remittance and/or digital credit services; • the Competition Authority of Kenya, which monitors mergers, acquisitions and potential abuses of market dominance to ensure fair competition; and • the Kenya Revenue Authority, which address - es tax obligations stemming from the pro - vider’s business activities. Typically, regulators with overlapping mandates would enter memoranda of understanding to govern their regulatory action or consult with each other before undertaking regulatory action. 2.7 No-Action Letters Regulators in Kenya have been known to issue “letters of no objection” , which typically state that an organisation’s proposal or activities do not contravene existing regulations or laws. A prominent example of this practice was the Cen - tral Bank of Kenya’s issuance of a letter of no objection in February 2007, enabling the opera - tion of M-PESA, Kenya’s pioneering mobile money transfer platform, in what was then an unregulated sector. An area where regulators may be called to issue letters of no objection is with regards to virtual assets. The VASPs Bill proposes to introduce specific scenarios in which letters of no objec -
tion would be utilised. Under this law, letters of no objection would be required: • When an entity intends to issue or promote an initial virtual asset offering within or origi - nating from Kenya, it must first apply for a licence from either the Central Bank of Kenya (CBK) or the Capital Markets Authority (CMA). The relevant authority would then issue a letter of no objection confirming it does not oppose such issuance. • When the CBK or CMA considers granting a virtual asset service provider licence to an applicant already operating within another regulated sector, a letter of no objection from the respective regulator would be a prerequi - site. 2.8 Outsourcing of Regulated Functions Digital Banking Under the Central Bank Prudential Guideline on Outsourcing (CBK/PG/16), any person undertak - ing “banking business” is: • prohibited from outsourcing certain core man - agement functions, such as corporate plan - ning, organisation, management and control and decision-making functions; • permitted to outsource some “material activi- ties” but they must receive the approval of the CBK before outsourcing these services, which include information system manage - ment and maintenance, application process - ing (eg, loan origination), claims administra - tion, cash movement and internal audit; and • permitted to outsource the following activi - ties and need only notify the CBK rather than seek its prior approval: (a) courier services; (b) credit background checks; (c) background investigations; and
458 CHAMBERS.COM
Powered by FlippingBook