The banking industry in Kenya is facing increasing risks of fraud, with reported cases rising from 173 in 2023 to 353 in 2024, and losses increasing from Sh412.5 million to Sh1.59 billion. According to the Central Bank of Kenya's latest Financial Sector Stability Report, this trend highlights the need for banks to implement more robust risk management measures. One key area of focus is the implementation of continuous Know Your Employee checks.
Currently, employee due diligence in many Kenyan banks is largely a recruitment exercise, with background checks conducted only when an employee is hired. However, this approach is no longer sufficient in today's digital banking landscape, where employees have access to multiple systems, digital channels, customer information, and transaction processes. The Central Bank of Kenya's report suggests that banks need to adopt a more proactive approach to managing employee risk.
The concept of Know Your Employee checks is similar to Know Your Customer checks, which have become a fundamental aspect of modern banking. Just as banks continuously monitor customer transactions and update customer information, they should also continuously monitor employee activities and update employee information. This can help identify potential risks and prevent fraud.
A recent incident at Equity Bank in 2025 illustrates the importance of continuous Know Your Employee checks. An internal investigation revealed that a manager's credentials were used to process over 40 transactions totaling Sh1.5 billion. This incident highlights the need for banks to implement ongoing risk management measures to protect customer information and prevent financial losses.
Implementing continuous Know Your Employee checks does not mean reading employees' private lives or tracking every personal transaction. Rather, it involves creating signals that warrant attention, such as monitoring changes in an employee's role or responsibilities, or reviewing information when there is a documented conflict of interest. The goal is to identify potential risks early, before they become disciplinary cases or financial losses.
Some Kenyan banks, such as KCB, have already taken steps to address employee misconduct, dismissing 34 employees in 2024 for fraud and professional negligence. However, the industry needs to adopt a more proactive approach to managing employee risk, rather than simply reacting to incidents after they occur. This requires a coherent Know Your Employee architecture that can help identify potential risks and prevent fraud.
The implementation of continuous Know Your Employee checks is not a radical concept, but rather a necessary measure to protect customer information and prevent financial losses. It requires a proportionate approach, with ongoing checks that are justified by the level of access and potential exposure. By adopting this approach, Kenyan banks can reduce the risk of banking fraud and protect their customers' interests.
Key points
- Banks in Kenya need to implement continuous Know Your Employee checks to mitigate the risk of banking fraud and protect customer information.
- The current approach to employee due diligence in many Kenyan banks is no longer sufficient in today's digital banking landscape.
- Continuous Know Your Employee checks involve monitoring changes in an employee's role or responsibilities, or reviewing information when there is a documented conflict of interest.
