The shilling closed on a low of Sh103.9 against the dollar on Thursday evening even as the CBK stepped up efforts to mop up extra shillings.
CBK Head of Communications Wallace Kantai on Thursday said that the level of success of demonetisation will only be known after the September 30 deadline.
Banks are on high alert after the Central Bank of Kenya (CBK) flagged 800 accounts of individuals who may attempt to clean their illicit money as the rush to exchange the old Sh1,000 notes enters the home stretch.
With just 10 days to go to the September 30 deadline when the old Sh1,000 note becomes obsolete and with more than Sh100 billion of the old currency believed to be in private hands, there is suspicion that corrupt individuals who have been hoarding the notes will take advantage of the rush to bank their ill-got money.
Also targeted for scrutiny are transactions that require huge amounts of money like buying vehicles and investment in shares.
Already, the shilling is weighed down by excess liquidity in the market, which is causing it to weaken against the dollar.
The shilling closed on a low of Sh103.9 against the dollar on Thursday evening even as the CBK stepped up efforts to mop up extra shillings by offering banks repurchase agreements in exchange for extra cash.
On Monday, the CBK mopped up Sh56.2 billion and also sucked out extra cash through a 15-year bond offering lucrative rates for Sh32.6 billion.
“At this point in time the level of vigilance is extremely high. Banks have been reminded to report any suspicious financial activity using know-your-customer rules,” said Mr Habil Olaka, the Kenya Bankers Association (KBA) chief executive.
“We are continuously advising banks to scrutinise every person who comes to exchange notes or makes unusually high deposits,” he said.
Meanwhile, it has emerged that at least 800 accounts have over the last three months been placed under investigation after their owners exchanged unusually high amounts of money causing suspicion on the source of the money.