Anti-Money Laundering Practices and Profitability of Commercial Banks in Kenya
| dc.contributor.author | Terer, Obed Kipkirui | |
| dc.date.accessioned | 2025-08-28T06:52:40Z | |
| dc.date.available | 2025-08-28T06:52:40Z | |
| dc.date.issued | 2025-05 | |
| dc.description | A Thesis Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of Degree of Master of Science (Finance) of Kenyatta University, May 2025. Supervisors 1. Lucy Wamugo Mwangi 2. Job Omagwa | |
| dc.description.abstract | Commercial bank performance is vital to economic stability, given their central role in providing financial products and services. However, this exposes banks to various risks that can adversely affect profitability. Profitability is a key indicator of a bank's financial stability and potential for growth. In June 2018, five banks in Kenya were fined a combined Kshs. 392 million by the Central Bank of Kenya for violating anti-money laundering (AML) regulations. In response, banks were compelled to allocate significant resources to strengthen their anti-money laundering practices, thereby increasing operational and compliance costs. The general objective of this study was to examine the effect of anti-money laundering practices on the profitability of commercial banks in Kenya. The specific objectives were to determine the effects of customer due diligence, transaction monitoring, anti-money laundering audits, and anti-money laundering training on the profitability of commercial banks in Kenya. Additionally, the study aimed to determine the moderating effect of corporate governance on the relationship between anti-money laundering practices and profitability. The study was guided by the theory of crying wolf, transparency-stability theory, agency theory, and regulatory dialectic theory. A positivist philosophy was adopted, utilizing an explanatory research design. The target population comprised all thirty-nine (39) commercial banks in Kenya, with purposive sampling yielding 105 respondents, of whom 77 provided the data. Primary data were collected via structured questionnaires, and secondary data were obtained from the Central Bank of Kenya’s annual banking supervision reports. Data were analyzed using SPSS. The findings revealed that customer due diligence, transaction monitoring, AML training, and AML audits all had a positive and statistically significant impact on bank profitability. Furthermore, corporate governance was found to significantly moderate the relationship between AML practices and profitability. Based on these findings, the study recommends that commercial banks adopt comprehensive AML strategies, including robust customer identity verification, risk assessments, transaction monitoring, regulatory reporting, regular staff training, and internal audits. Strengthening corporate governance structures particularly through a competent and accountable board is also essential for effective oversight of AML efforts. Lastly, the study suggests further research to examine the broader impact of AML practices on Kenya’s financial sector and to explore other potential moderating variables in the relationship between AML practices and bank profitability. | |
| dc.description.sponsorship | Kenyatta University | |
| dc.identifier.uri | https://ir-library.ku.ac.ke/handle/123456789/31295 | |
| dc.language.iso | en | |
| dc.publisher | Kenyatta University | |
| dc.title | Anti-Money Laundering Practices and Profitability of Commercial Banks in Kenya | |
| dc.type | Thesis |