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National Payment System Act

Cap. 491A

This is the version of this Act as it was from 31 December 2022 to 14 September 2023. Read the latest available version.
National Payment System Act
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Cap. 491A
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LAWS OF KENYA

NATIONAL PAYMENT SYSTEM ACT

CAP. 491A

  • Published in Kenya Gazette Vol. CXIII—No. 122 on 16 December 2011
  • Assented to on 2 December 2011
  • Commenced on 24 March 2014
  1. [Amended by Microfinance (Amendment) Act, 2013 (Act No. 41 of 2013) on 11 December 2013]
  2. [Amended by Companies and Insolvency Legislation (Consequential Amendments) Act, 2015 (Act No. 19 of 2015) on 3 July 2017]
  3. [Revised by 24th Annual Supplement (Legal Notice 221 of 2023) on 31 December 2022]
An Act of Parliament to make provision for the regulation and supervision of payment systems and payment service providers, and for connected purposes

Part I – PRELIMINARY

1. Short title

This Act may be cited as the National Payment System Act.

2. Interpretation

In this Act, unless the context otherwise requires—"bank" has the meaning assigned to it in the Banking Act (Cap. 488);"business day" means any day, other than a Sunday, a public holiday declared in accordance with the Public Holidays Act (Cap. 110), a day declared to be a bank holiday under the Banking Act (Cap. 488), or a day declared to be a bank holiday under the Microfinance Act (Cap. 493C), on which the institutions and the Central Bank are open to the public for carrying on business functions;"Cabinet Secretary" means the Cabinet Secretary for the time being responsible for matters relating to finance;"Central Bank" means the Central Bank of Kenya established under the Central Bank of Kenya Act (Cap. 491);"Central Bank of Kenya settlement system" means a settlement system established and operated by, or under the control of, the Central Bank;"Central Bank of Kenya settlement system participant" means—
(a)the Central Bank;
(b)a bank, an institution or a branch of a foreign institution; or
(c)a designated payment system operator, that participates in the Central Bank of Kenya settlement system.
"clear" means the exchange of payment instructions, and "clearing" shall be construed accordingly;"clearing, netting and settlement agreements" means written agreements with regard to clearing, netting or settlement concluded between the Central Bank of Kenya settlement system participants or settlement system participants;"designated payment instrument" means a payment instrument designated in accordance with section 6;"designated payment system" means a payment system designated in accordance with section 3;"designated payment system operator" means an operator of a designated payment system;"designated payment system participant" means a person who is—
(a)a participant in a designated payment system; or
(b)a designated payment system operator;
"failure to settle" means the inability of a settlement system participant to meet its settlement obligations in a clearing house;"institution" means a bank, mortgage finance company or a financial institution as defined in the Banking Act (Cap. 488) or a microfinance bank business as defined in the Microfinance Act (Cap. 493C) or any other body which the Cabinet Secretary may, in consultation with the Central Bank, declare, by notice in the Gazette, to be an institution for the purposes of this Act;"netting" means the determination of the net payment obligations between two or more settlement system participants within a payment clearing house or the determination of the net settlement obligations between two or more settlement system participants within a settlement system;"payment clearing house" means an arrangement between two or more Central Bank settlement system participants, excluding a designated payment system operator, governing the clearing of payment instructions between those Central Bank settlement system participants;"payment clearing house system operator" means a person, other than a designated payment system operator, who clears on behalf of any two or more Central Bank settlement system participants;"payment instrument" means any instrument, whether tangible or intangible, that enables a person to obtain money, goods or services, or to otherwise make payment;"payment instruction" means an instruction to a settlement system participant to transfer funds or make a payment;"payment obligation" means an indebtedness that is owed by one settlement system participant to another as a result of the clearing of one or more payment instructions;"payment service provider" means—
(i)a person, company or organisation acting as provider in relation to sending, receiving, storing or processing of payments or the provision of other services in relation to payment services through any electronic system;
(ii)a person, company or organisation which owns, possesses, operates, manages or controls a public switched network for the provision of payment services; or
(iii)any other person, company or organization that processes or stores data on behalf of such payment service providers or users of such payment services;
"payment system" means a system or arrangement that enables payments to be effected between a payer and a beneficiary, or facilitates the circulation of money, and includes any instruments and procedures that relate to the system;"payment system management body" means a body recognized by the Central Bank in accordance with section 7;"person" includes any legal entity including a trust;"settlement" means discharge of settlement obligations;"settlement instruction" means an instruction given to a settlement system by a settlement system participant or by a payment clearing house system operator on behalf of a Central Bank settlement system participant to effect settlement of one or more payment obligations, or to discharge any other obligation of one system participant to another system participant;"settlement obligation" means an indebtedness that is owed by one settlement system participant to another as a result of one or more settlement instructions;"system operator" means a person, other than a designated payment system operator, authorized in terms of section 8(2)(c) to provide services to any two or more persons in respect of payment instructions;"settlement system" means a system established and operated by the Central Bank for the discharge of payment or settlement obligations, or the discharge of payment and settlement obligations, between system participants in that system;"settlement system participant" means—
(a)a Central Bank of Kenya settlement system participant; or
(b)a designated payment system participant; and
"systemic risk" means the risk that failure of one or more settlement system participants, for whatever reason, to meet their payment obligations or their settlement obligations may result in any or all of the other settlement system participants being unable to meet their respective payment or settlement obligations.[Act No. 41 of 2013, Sch, Act No. 19 of 2015, s. 167.]

Part II – PROVISIONS ON DESIGNATION

3. Designation of a payment system

(1)The Central Bank may, by notice in the Gazette, designate a payment system for the purposes of this Act, if it is of the opinion that—
(a)the payment system poses systemic risk;
(b)the designation is necessary to protect the interest of the public; or
(c)such designation is in the interest of the integrity of the payment system.
(2)The notice designating a payment system under subsection (1) shall specify—
(a)the payment system that is the subject of the designation;
(b)the operator of the payment system that is the subject of the designation; and
(c)any terms and conditions to which the designation may be subject.
(3)The Central Bank shall give a written notice of designation of a payment system to the operator of the payment system that is the subject of designation.
(4)The Central Bank may revoke or vary any designation made under this section by—
(a)amending or revoking any condition to which the designation may be subject; or
(b)making the designation subject to a new condition or conditions.
(5)In determining whether or not to revoke or vary a designation, the Central Bank may have regard to any or all of the following matters—
(a)failure by the designated payment system to comply with any condition to which the designation may be subject;
(b)whether or not the designated payment system has ceased to operate;
(c)whether or not the designated payment system operator has knowingly furnished information or documents which are false or misleading in any material respect to the Central Bank in connection with the designation of the system;
(d)whether or not it is in the public interest to revoke the designation;
(e)any other matter that the Central Bank may deem appropriate.
(6)The revocation of a designation or the variation of the conditions to which a designation is subject shall not—
(a)have retroactive effect;
(b)affect the validity or enforceability of the rules of the designated payment system, nor shall it affect any payment to or out of the account of a payment system participant or netting or settlement that took place, prior to the coming into effect of such revocation or variation.
(7)Revocation of designation of a payment system or variation of conditions thereof, if any, shall be by notice in the Gazette, and advice thereof shall be given in writing to the designated payment system operator.
(8)Without prejudice to Section 32 (1), an operator of a payment system shall, upon advice by the Central Bank to that effect, and within such period as the Bank may prescribe, apply for the designation of the payment system under this Act.
(9)A person who, upon receipt of advice from the Central Bank in accordance with subsection (8)—
(a)fails or refuses to apply for designation of a payment system in accordance with the advice; and
(b)continues to operate a payment system that has not been designated under this Act commits an offence.

4. Amendment to constitution and rules of designated payment system

No amendment to the constitution of any designated payment system, or to the rules governing the system, shall have effect until they have been approved by the Central Bank.

5. Inspection of constitution and rules of designated payment system

The constitution of every designated payment system and the rules governing the system, together with any amendment to that constitution and those rules, shall be kept at—
(a)the offices of the Central Bank; and
(b)the head office in Kenya of every participant in the system,
and shall be open for inspection by members of the public at all times during normal office hours.

6. Designation of payment instrument

(1)The Central Bank may, by notice in the Gazette, designate a payment instrument for purposes of this Act, if the Bank is of the opinion that—
(a)the payment instrument is of widespread use as a means of making payment and may affect the payment systems of Kenya;
(b)the designation is necessary to protect the interests of the public; or
(c)such designation is in the interest of the integrity of the payment instrument.
(2)The notice designating a payment instrument under subsection (1) shall specify—
(a)the payment instrument that is the subject of the designation;
(b)the issuer of the payment instrument that is the subject of the designation; and
(c)any terms and conditions to which the designation may be subject.
(3)Where a payment instrument has been gazetted for designation, pursuant to subsection (1) and (2), the issuer of that payment instrument shall comply with such requirements as the Central Bank may specify.
(4)The Central Bank shall give a written notice of designation of a payment instrument to the issuer of the payment instrument that has been designated pursuant to section 6(1).
(5)The Central Bank may revoke or vary any designation of a payment instrument granted under section 6(1) if, in the opinion of the Central Bank, the issuer of a designated payment instrument has—
(a)contravened any of the provisions of this Act or regulations made thereunder;
(b)contravened any restriction or condition to which the designation is subject;
(c)failed to comply with any regulations, guidelines, circulars, notices or standards issued by the Central Bank under this Act;
(d)made a false, incorrect or misleading statement in the documents or information submitted under subsection (3);
(e)ceased issuing the payment instrument for a continuous period of six months;
(f)goes into liquidation or is wound up or is otherwise dissolved;
(g)it is in the public interest to vary or revoke the designation;
(h)there exists any other ground which in the opinion of the Central Bank warrants variation or revocation.
(6)The Central Bank shall, before making a decision to revoke the designation under subsection (5), offer the issuer of a designated payment instrument a reasonable opportunity to make representations.
(7)The revocation of a designation or the variation of conditions to which a designation is subject shall not have retroactive effect.
(8)Revocation of designation of a payment instrument or variation of conditions thereof, if any, shall be by notice in the Gazette, and written advice thereof shall be given to the designated payment instrument issuer.
(9)Without prejudice to section 32 (1), an issuer of a payment instrument shall, upon written advice from the Central Bank to that effect, and within such period as the Bank may prescribe, apply for the designation of the payment instrument under this Act.
(10)A person who, upon receipt of advice by the Central Bank in accordance with subsection (9)—
(a)fails or refuses to apply for designation of a payment instrument in accordance with the advice commits an offence and is liable, on conviction, to a fine not exceeding one million shillings, or to imprisonment for a term not exceeding five years, or both; and
(b)continues to issue a payment instrument that has not been designated under this Act, commits an offence and is liable to a fine not exceeding five hundred thousand shillings or to imprisonment for a term not exceeding three years, or both.

Part III – PROVISIONS RELATING TO OPERATORS

7. Recognition of a payment system management body

(1)The Central Bank shall, upon designation of a payment system under this Act, automatically recognize the management body of such payment system.
(2)A payment system management body recognized pursuant to the provisions of this section shall be subject to the guidelines that may be issued by the Central Bank from time to time.
(3)Where a payment system management body recognised under subsection (1) oversees only one designated payment system, the recognition of the payment system management body shall stand revoked upon revocation of designation of the payment system:Provided that, where a recognised payment system management body manages several designated payment systems, the revocation of designation of any one of the payment systems shall not affect the recognition status of the payment system management body with respect to the payment systems whose designation has not been revoked.

8. Objects, etc. of recognized payment system management body

(1)A recognised payment system management body shall manage and regulate, in relation to its members, all matters affecting payment instructions, and in connection with those objects, shall—
(a)provide a forum for the consideration of matters of policy and mutual interest concerning its members;
(b)act as a medium for communication by its members with the Government, the Central Bank, any financial or other exchange, other public bodies, authorities and officials, the news media, the general public and other private associations and institutions; and
(c)deal with and promote any other matter of interest to its members and foster co-operation among them.
(2)In addition to any other provisions, the rules of a recognised payment system management body shall empower that body—
(a)to admit members and to regulate, control and with the approval of the Central Bank terminate membership;
(b)to constitute, establish or dissolve any body, committee or forum consisting of its members and which has an impact on, interacts with, has access to or makes use of any payment, clearing or settlement systems or operations;
(c)to—
(i)recommend for approval by the Central Bank criteria subject to which any person is to be granted limited membership of the payment system management body or is to be authorized to act as a system operator or a payment clearing house system operator within a payment system; and
(ii)authorize that person to act as a system operator or payment clearing house system operator in accordance with that criteria; and
(d)to recommend for approval by the Central Bank criteria subject to and in accordance with which a member who is also a Central Bank settlement system participant may be authorized to—
(i)allow a bank, an institution or a branch of a foreign institution that is not a Central Bank settlement system participant to clear; or
(ii)clear on behalf of a bank, an institution or a branch of a foreign institution that is not a Central Bank settlement system participant:
Provided that the member shall settle payment obligations on behalf of such bank, an institution or branch of a foreign institution referred to in subparagraphs (i) and (ii).

9. Effecting settlement

(1)Settlement shall be effected by payment of money or by means of entries passed through the Central Bank settlement system or a designated payment system.
(2)A settlement that has been effected by payment of money or by means of an entry to the credit of the account maintained by a settlement system participant in the Central Bank settlement system or a designated payment system shall be final and irrevocable.
(3)An entry to or payment out of the account of a designated payment system participant to settle a payment or settlement obligation in a designated payment system shall be final and irrevocable.

10. Clearing provisions

(1)A person shall not clear payment instructions unless that person is—
(a)a Central Bank settlement system participant; or
(b)a bank, an institution or a branch of a foreign institution that is allowed to clear in terms of section 8(2)(d)(i).
(2)A person who contravenes the provisions of subsection (1) commits an offence and shall be liable, on conviction, to a fine not exceeding five hundred thousand shillings or imprisonment for a term not exceeding three years, or both.

11. Payments to third parties

A person may, as a regular feature of that person’s business, accept money or payment instructions from any other person for purposes of making payment on behalf of that other person to whom that payment is due, if—
(a)the first-mentioned person is the Central Bank, a bank, an institution or a branch of a foreign institution, a payment service provider or a designated payment system operator; or
(b)the first-mentioned person is the Postal Corporation of Kenya established under the Postal Corporation of Kenya Act (Cap. 411), the Kenya Post Office Savings Bank established under the Kenya Post Office Savings Bank Act (Cap. 493B), a building society established under the Building Societies Act (Cap. 489); and
(c)the money is accepted or payment is made in accordance with directives issued by the Central Bank from time to time in accordance with section 22.

12. Authorisation of Payment Service Provider

(1)No person shall, in Kenya conduct the business of a payment service provider except an authorized payment service provider.
(2)A person who contravenes the provisions of subsection (1) commits an offence and shall, on conviction be liable to a fine not exceeding five hundred thousand shillings, or to imprisonment for a term not exceeding three years, or to both.

13. Application for authorisation

(1)A person proposing to transact the business of a payment service provider shall, before commencing such business, apply to the Bank for authorization.
(2)An application under this section shall be made in the prescribed form and shall be forwarded to the Bank together with the prescribed fee.
(3)In considering an application for authorization, the Bank may require to be satisfied as to the financial condition and history of the applicant, the character of its management, the adequacy of its capital structure and the convenience and needs of the area to be served and the public interest which will be served by granting of the authorisation.
(4)The Bank may, subject to the payment of the prescribed fee and to such conditions as it may consider necessary, grant authorization to the applicant.
(5)Where authorization has been granted under this section, the Bank may add, vary, or substitute conditions attached thereto.
(6)An authorisation issued under this section shall, unless earlier revoked, be valid for twelve months next following the date of issue:Provided that where an application for its renewal is made under this section, the authorisation shall be deemed to continue in force until the application for renewal is determined.

14. Renewal of authorisation

(1)An authorisation made under section 13 may on expiry be renewed for a further period of twelve months:Provided that where an authorised payment service provider fails to commence business in Kenya within six months of the grant of authorisation, the authorized payment service provider shall, if still intending to conduct payment service business in Kenya, apply for authorization as if the first authorisation had never been granted.
(2)An application for the renewal of an authorization shall—
(a)be made in the prescribed form and forwarded to the Bank together with the prescribed fee;
(b)be lodged with the Bank at least two months prior to the expiry of the authorisation.
(3)An application for renewal of an authorization shall be considered in accordance with the provisions of section 13.

15. Revocation of authorisation

(1)Subject to subsection (2), the Bank may, by notice in writing to an authorised payment service provider, revoke or suspend an authorisation for such period as it may specify, if the authorised payment service provider—
(a)ceases to carry on business in Kenya or goes into liquidation or is wound up, or is otherwise dissolved;
(b)fails to comply with the provisions of this Act or any condition attached to an authorisation; or
(c)conducts business in a manner detrimental to the best interests of the public.
(2)Before revoking or suspending an authorization under this section, the Bank shall give an authorized payment service provider, not less than fourteen days notice in writing and shall consider any representations made to it in writing by the authorised payment service provider within that period.

16. Netting agreements and rules

(1)To the extent that a provision of the Insolvency Act (Cap. 53), the Banking Act (Cap. 488) the Building Societies Act (Cap. 489) the Co-operative Societies Act (Cap. 490) or the Microfinance Act (Cap. 493C) is inconsistent with this section, this section prevails.
(2)This section applies to the following agreements and rules relating to a settlement system participant—
(a)a written netting agreement to which the participant is a party;
(b)the settlement system rules;
(c)a clearing, netting or settlement agreement to which the participant is a party;
(d)netting rules applicable to the participant in relation to a settlement agreement.
(3)If a settlement system participant is placed in liquidation by the High Court, enters administration or is placed under statutory management, any provision contained in an agreement or rules to which this section applies is binding on the liquidator, administrator or statutory manager in respect of a payment or settlement obligation-
(a)that was determined through netting before the liquidation order or administration order, or the appointment of the statutory manager, was made but is to be discharged on or after the date on which the order or appointment was made; or
(b)the discharge of which was overdue on that date.
(4)An administrator appointed under the Insolvency Act (Cap. 53), in respect of a settlement system participant shall give written notice to the Central Bank to withdraw the participant's participation from the Central Bank settlement system, in which case the participant ceases to be entitled to participate in that system, other than for purposes of—
(a)discharging a payment or settlement obligation in accordance with the settlement system rules;
(b)any clearing, netting or settlement agreement to which the participant was a party; or
(c)any netting rules applicable to the participant in relation to those agreements.
(5)As soon as practicable after an application to the High Court for the liquidation of a settlement system participant is made and, if a liquidation order is made in consequence of the application, as soon as practicable after the order is made, the applicant shall lodge with the Central Bank a copy of the application and a copy of the order.
(6)As soon as practicable after receiving a copy of an application for the liquidation of a settlement system participant, the Central Bank shall, if the participant is a designated payment system participant, notify the operator of the payment system of the application.
(7)When a copy of a liquidation order relating to a settlement system participant has been lodged with the Central Bank in accordance with subsection (5), the participant ceases to be entitled to clear payments or participate in a settlement system, other than for purposes of discharging a payment or settlement obligation in accordance with—
(a)the rules of the settlement system; or
(b)a clearing, netting or settlement agreement to which the participant is a party; or
(c)any netting rules applicable to the participant in relation to such an agreement.
(8)When a settlement system participant is placed in liquidation or enters administration, or a statutory manager is appointed in respect of the participant, the liquidator, administrator or manager is bound by any payment or settlement that is final and irrevocable as provided by section 9(2) or (3).
(9)A court in Kenya may not recognise or give effect to—
(a)an order of a court exercising jurisdiction under the law relating to insolvency in a place outside Kenya; or
(b)an act of a person appointed in a place outside Kenya to perform functions under that law,
to the extent that this Act does not authorise a court in Kenya to make such an order, or a liquidator, administrator or statutory manager, or any other officer having functions under the Insolvency Act (Cap. 53), to do such an act.
(10)In this section, a reference to netting rules includes any recognised practices relating to the operation or application of those rules.[Act No. 19 of 2015, s. 168.]

Part IV – PROVISIONS ON REGULATION AND SUPERVISION

17. Powers and functions of the Central Bank

(1)Notwithstanding subsection (2), the Central Bank shall, in the exercise of its role of formulating and implementing such policies as best promote the establishment, regulation and supervision of efficient and effective payment, clearing and settlement systems, exercise all the powers and perform all the functions conferred and imposed on it by this Act, the Central Bank of Kenya Act (Cap. 491), and any other law.
(2)For the proper exercise of its powers and efficient performance of its functions under this Act, the Central Bank may, in writing and on such conditions as it deems necessary—
(a)delegate to any of its officers the exercise of any of its powers under this Act; or
(b)authorize any such officer to perform any of its functions under this Act.
(3)Any delegation of a power or the performance of a function under subsection (2)—
(a)shall not prevent the Central Bank from exercising that power or performing that function; and
(b)may at any time be withdrawn in writing by the Central Bank.

18. Prohibition of issuance of payment instruments

(1)The Central Bank may, by order in the Gazette, prohibit any person from issuing or using any payment instrument if—
(a)the issuing or use of the payment instrument is detrimental to the reliable, safe, efficient and smooth operation of a national payment system; or
(b)the prohibition is in the interest of the public.
(2)The Central Bank may, in considering whether to prohibit any person from issuing or using any payment instrument under subsection (1), inspect the premises, equipment, machinery, apparatus, books or other documents, or accounts and transactions of the issuer or user of the payment instrument, upon giving reasonable written notice to the issuer or user.
(3)The Central Bank shall, before issuing an order of prohibition under subsection (1), offer the issuer or user of a payment instrument a reasonable opportunity to make representations on the impending prohibition.

19. Participation by the Central Bank

(1)The Central Bank may do all or any of the following in relation to a designated payment system or to such payment system and its clearing house—
(a)be a participant and enforce any failure to settle arrangement;
(b)act as a custodian of a settlement participant’s settlement assets or act as a settlement agent.
(c)regulate and supervise such system(s).
(2)The Central Bank may provide any additional services it considers desirable, including facilities for clearing financial effects to designated payment system participants.

20. Provision of information to the Central Bank

(1)A person shall, upon being required to do so, provide the Central Bank with such information relating to a payment system or payment instrument, in such form and at such times as the Central Bank may prescribe.
(2)In addition to any information that is required to be provided to the Central Bank under the Banking Act (Cap. 488) relating to banks or under the Microfinance Act (Cap. 493C) relating to microfinance banks, the management of every designated payment system, and every participant in the system, shall provide the Central Bank with such reports, returns and other information, at such times and in such form as the Central Bank may prescribe, regarding—
(a)the volumes and values of payment instructions cleared in the system;
(b)the volumes or values of the participant’s payment obligations and settlement obligations; and
(c)any other information regarding the operation of the system as the Central Bank may require.
(3)Subject to subsection (4), any information—
(a)obtained by the Central Bank in accordance with subsection (1); and
(b)identifying a Central Bank settlement system participant,
shall be confidential and shall not be disclosed by any director or officer of the Central Bank to any person, except to an officer of the Central Bank who requires that information for purposes of the execution of his duties under this Act, the Central Bank of Kenya Act (Cap. 491), the Banking Act (Cap. 488), the Building Societies Act (Cap. 489), the Microfinance Act (Cap. 493C) or the Proceeds of Crime and Anti-Money Laundering Act (Cap. 59A).
(4)Notwithstanding the provisions of subsection (3), the Central Bank may disclose any information—
(a)of which the disclosure is necessary to protect the integrity, effectiveness or security of the payment system, or if required by law to do so; or
(b)to any monetary authority or financial regulatory authority, within or outside Kenya, where such information is reasonably required for the proper discharge of the functions of the Central Bank or the requesting monetary authority or financial regulatory authority.
(5)A person who contravenes the provisions of subsection (1), (2) or (3) commits an offence and shall be liable on conviction, to a fine not exceeding five hundred thousand shillings, or to imprisonment for a term not exceeding one year, or both.
(6)Notwithstanding the provisions of subsection (5), no duty to which—
(a)a participant or its officers may be subject, shall be breached by reason of the disclosure in good faith, of any information under subsections (1) and (2) in the course of the performance of its duties and no action shall lie against the participant or any of its officers on account of such disclosure;
(b)the Central Bank or its officers may be subject, shall be breached by reason of the disclosure in good faith, of any information under subsection (4)(a) and (b) in the course of the performance of its duties and no action shall lie against the Central Bank or any of its officers on account of such disclosure.
[Act No. 41 of 2013, Sch.]

21. Settlement of disputes

(1)If any Central Bank settlement system participant considers itself aggrieved by a decision taken by the Central Bank under any provision of this Act, the matter shall be deemed to constitute a dispute between that Central Bank settlement system participant and the Central Bank, which dispute shall be settled as provided in this section.
(2)The Central Bank settlement system participant concerned shall, within ninety days after the decision of the Central Bank, in writing, furnish the Central Bank with full particulars of the grievance, and thereafter the Central Bank settlement system participant and the Central Bank shall endeavour to settle the dispute within seven business days of the receipt by the Central Bank of those particulars.
(3)If the Central Bank settlement system participant and the Central Bank do not settle the dispute as provided for under subsection (2), they shall refer the dispute to mediation within a further period of ten business days.
(4)The following provisions shall apply to mediation under subsection 3 —
(a)the Central Bank settlement system participant concerned and the Central Bank shall agree on a mediator;
(b)the mediator shall familiarize himself with the position held by the Central Bank settlement system participant concerned and the Central Bank, respectively;
(c)the mediator, the Central Bank settlement system participant concerned and the Central Bank shall discuss the dispute at a meeting attended by them all;
(d)the Central Bank settlement system participant concerned and the Central Bank shall, at or following such meeting, and with the aid of the mediator, attempt to settle the dispute by consensus; and
(e)the Central Bank settlement system participant concerned and the Central Bank shall share the mediator’s costs in such proportion as they may agree.
(5)If the Central Bank settlement system participant concerned and the Central Bank are unable to settle the dispute by consensus in accordance with subsection (2) or (4), the dispute shall be referred—
(a)to a single arbitrator to be agreed upon by the Central Bank settlement system participant and the Central Bank; or
(b)failing such agreement, to an arbitrator appointed, at the request of the Central Bank settlement system participant or the Central Bank, by a recognised body concerned with the facilitation and promotion of the resolution of disputes by means of mediation or arbitration.
(6)An arbitrator referred to in subsection (5) shall, as far as possible, be a person appointed on account of his knowledge of the law and payment systems.
(7)The provisions of the Arbitration Act (Cap. 49) or any revisions thereof, shall apply, mutatis mutandis, to an arbitration undertaken in accordance with subsection (5).
(8)The decision of the arbitrator shall be final and binding on the Central Bank settlement system participant concerned and the Central Bank.

22. Power of Central Bank to advise and direct

(1)The Central Bank may, from time to time, issue directives to any person regarding a payment system or a payment instrument on the application of the provisions of this Act.
(2)In considering whether or not to issue a directive in accordance with subsection (1), the Central Bank may have regard to any or all of the following aspects—
(a)that reasonable grounds exist to believe that any person is engaging in, or is about to engage in, any act, omission or course of conduct, with respect to the payment system or payment instrument, that results or is likely to result in systemic risk;
(b)that reasonable grounds exist to believe that any person is engaging in, or is about to engage in, any act, omission or course of conduct, that compromises or is likely to compromise the integrity, effectiveness, efficiency or security of the payment system or payment instrument;
(c)the public interest;
(d)the integrity, effectiveness, efficiency or security of the payment system or payment instrument;
(e)national financial stability;
(f)any other matter that the Central Bank may consider appropriate.
(3)The Central Bank may, in writing, over and above any directive contemplated in subsection (1), issue a directive to a person requiring the person, to—
(a)cease or refrain from engaging in the act, omission or course of conduct or perform such other acts as are necessary to remedy the situation;
(b)perform such acts as are necessary to comply with the directive or to effect the changes; or
(c)provide the Central Bank with such information and documents relating to the matter as specified in the directive.
(4)The Central Bank may cancel, in writing, any directive issued under this Act.
(5)In considering whether or not to cancel a directive in accordance with subsection (4), the Central Bank shall have regard to the factors referred to in subsection (2).
(6)A directive issued by the Central Bank shall not have any retroactive effect.
(7)Any person who neglects, refuses or fails to comply with a directive issued under subsection (1) or (3) commits an offence and shall be liable on conviction to a fine not exceeding five hundred thousand shillings, or to imprisonment for a term not exceeding three years, or both.
(8)A person who receives a directive pursuant to the provisions of this section shall comply with the directive within such period as may be specified in the directive.

23. Audits and inspection

(1)The Central Bank shall, for the purposes of carrying out its functions under this Act, conduct audits and inspections of a designated payment system or of an issuer of a designated payment instrument.
(2)Every designated payment system participant or the issuer of a designated payment instrument shall, as may be required by the Central Bank, assist the Central Bank to the extent necessary, to enable the Central Bank carry out an audit or inspection.

24. Reports

The Central Bank shall prepare and submit to the Cabinet Secretary —
(a)such reports as the Cabinet Secretary may require; and
(b)such periodic reports, and at such intervals, as it considers appropriate,
on the operations of every designated payment system or designated payment instrument.[Act No. 19 of 2015, s. 169.]

Part V – MISCELLANEOUS

25. Utilization of assets of a designated payment system participant

Despite anything to the contrary in any law relating to insolvency, any asset of a designated payment system participant which was provided prior to the issue of any order for that settlement system participant’s winding-up by that participant to the Central Bank, or the designated payment system operator, as security for a loan in respect of its settlement obligations, may be utilized by the Central Bank or the designated payment system operator, as the case may be, to the extent required for the discharge of the settlement obligations of the payment system participants.

26. Retention of records

(1)Notwithstanding anything to the contrary in any law relating to the retention of records, the Central Bank, the Central Bank settlement system participants, payment clearing house system operators and system operators, shall retain all records obtained by them during the course of the operations and administration of a payment system or the issuance of a payment instrument, for a period of seven years from the date of each particular record.
(2)The retention of records under subsection (1) may be effected by electronic means.

27. Use of confidential information for personal gain

(1)Subject to subsection (2), if—
(a)any officer or employee of the Central Bank; or
(b)any member or employee of a payment system management body,
for his personal gain, makes use of any information which he has acquired in the performance of his functions under this Act, or under the constitution or rules of any designated payment system, and which relates to the affairs of a particular institution, he commits an offence and is liable on conviction to a fine not exceeding five hundred thousand shillings, or imprisonment for a term not exceeding one year, or both.
(2)It shall be a defence to a charge under subsection (1) for the person charged to show that the information which he used was generally known to members of the public or to a substantial section of the public.

28. Priority of certain instruments on winding up

(1)In this section, "priority payment instruction" means a money order, bank draft or similar payment instruction issued, directly or indirectly, by a participant in a designated payment system, but does not include an instrument issued by one such participant to another for the purpose of effecting a payment between them.
(2)Despite anything to the contrary in the Insolvency Act (Cap. 53) and subject to this section, if a participant in a designated payment system is a company that is liquidated under the Insolvency Act (Cap. 53), unpaid priority payment instructions that were drawn on the participant and cleared through the payment system before the making of the liquidation order-
(a)are payable from the participant's assets; and
(b)rank in preference above any other unsecured claim against the assets.
(3)A payment is not payable under subsection (2) in preference to any other claim against assets unless a request for the payment has been made within sixty days after the making of the liquidation order in relation to the participant concerned.
(4)Subsection (2) does not permit a payment instruction to be settled in preference to any other claim against any assets, if the instruction was drawn on or certified or issued by the participant concerned with a view to giving the drawee of the instruction a preference over the participant's other creditors.[Act No. 19 of 2015, s. 171.]

29. Misleading advertisements

(1)Any person who issues an advertisement, brochure, circular or in any way makes representations inviting any person to participate in a payment system or in the issuance and usage of a payment instrument which—
(a)falsely represents that he is designated to operate the payment system or issue the payment instrument under the provisions of this Act;
(b)falsely represents that he is recognised to manage a payment system under the provisions of this Act; or
(c)is issued contrary to the provisions of this Act,
commits an offence and is liable on conviction to a fine not exceeding five hundred thousand shillings or imprisonment for a term not exceeding one year, or both.
(2)The Central Bank may at any time direct any person to withdraw, amend or refrain from issuing any advertisement, brochure, circular or making or desist from making any other representation relating to participation in the payment system or issuance of a payment instrument, which in its sole discretion, it considers to be misleading.

30. Relief from prosecution

No action shall lie against the Central Bank or any of its officers or other persons appointed or authorized to perform any function under this Act, in respect of anything done or omitted to be done by him in good faith in the exercise or performance of any power, authority, or function conferred or imposed on him under this Act.

31. Regulations and guidelines

(1)The Cabinet Secretary may make regulations generally for the better carrying into effect the provisions of this Act.
(2)The Central Bank may—
(a)prescribe anything which under this Act may be prescribed;
(b)subject to this Act, issue guidelines in respect of any matter relating to the administration or enforcement of this Act; and
(c)prescribe monetary fines for payment system operators, issuers of payment instruments or authorized payment service providers, which shall not exceed one million shillings.
[Act No. 19 of 2015, s. 170.]

32. [Spent]

33. [Spent]
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History of this document

04 November 2025
Read this version
15 September 2023
Read this version
31 December 2022 this version
03 July 2017
Read this version
24 March 2014
Commenced
11 December 2013
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16 December 2011
Read this version
02 December 2011
Assented to

Cited documents 14

Act 14
1. Companies Act 2184 citations
2. Arbitration Act 1364 citations
3. Insolvency Act 869 citations
4. Co-operative Societies Act 534 citations
5. Banking Act 524 citations
6. Proceeds of Crime and Anti-Money Laundering Act 438 citations
7. Central Bank of Kenya Act 93 citations
8. Microfinance Act 77 citations
9. Postal Corporation of Kenya Act 49 citations
10. Building Societies Act 26 citations

Documents citing this one 23

Gazette 9
1. Kenya Gazette Vol. CXV-No. 73
2. Kenya Gazette Vol. CXVI-No. 100
3. Kenya Gazette Vol. CXVI-No. 103
4. Kenya Gazette Vol. CXVI-No. 91
5. Kenya Gazette Vol. CXVI-No. 94
6. Kenya Gazette Vol. CXVI-No. 98
7. Kenya Gazette Vol. CXX-No. 130
8. Kenya Gazette Vol. CXXIII-No. 217
9. Kenya Gazette Vol. CXXVII-No. 215
Judgment 9
1. Republic v National Transport & Safety Authority, Cabinet Secretary For Transport & Infrastructure, Principal Secretary -State Department of Transport, Traffic Commandant, Attorney General, Equity Bank Ltd, Kenya Commercial Bank Ltd, Co-operative Bank Ltd, Family Bank Ltd, Fibre Space Ltd (1963) & Safaricom Ltd Ex parte James Maina Mugo (Judicial Review 447 of 2014) [2015] KEHC 5372 (KLR) (Judicial Review) (30 April 2015) (Judgment) 13 citations
2. Wafula v Safaricom Ltd & 4 others (Petition E362 of 2020) [2025] KEHC 229 (KLR) (Constitutional and Human Rights) (22 January 2025) (Judgment) 1 citation
3. Kenya Commerce Exchange Service Bureau Limited (Kenex v Central Bank of Kenya (Constitutional Petition E181 of 2021) [2022] KEHC 13189 (KLR) (Constitutional and Judicial Review) (30 September 2022) (Judgment) Interpreted
4. Lakhlani (Suing as the Legal Representative of the Estate of Krishna Kumar Shivalal alias Krishnakumar Shivlal Lakhlani - Deceased) v Lakhlani (Environment & Land Case 32 of 2018) [2022] KEELC 15612 (KLR) (25 January 2022) (Judgment) Cited
5. Mobile Pay Limited v Governor Central Bank of Kenya & another (Constitutional Petition E028 of 2023) [2024] KEHC 8940 (KLR) (24 July 2024) (Ruling) Interpreted
6. Njongoro v Kenya Bankers Association & 2 others (Commercial Case E438 of 2019) [2023] KEHC 21124 (KLR) (Commercial and Tax) (21 July 2023) (Judgment) Cited
7. Ochiel & 4 others v Ethics & Anti-Corruption Commission & another; Waterfront Outlets Limited & 4 others (Interested Parties) (Petition E004 of 2023) [2024] KEHC 8341 (KLR) (Anti-Corruption and Economic Crimes) (8 July 2024) (Judgment)
8. Pesapal Limited v Commissioner of Domestic Taxes (Income Tax Appeal E081 of 2023) [2025] KEHC 12284 (KLR) (Commercial and Tax) (27 August 2025) (Judgment)
9. Republic v Safaricom Kenya Limited & another (Miscellaneous Criminal Application E009 of 2023) [2023] KEMC 262 (KLR) (10 February 2023) (Ruling)
Act 2
1. Excise Duty Act 178 citations
2. Virtual Asset Service Providers Act 3 citations
Bill 2
1. The Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023
2. The Companies and Insolvency Legislation (Consequential Amendments) Bill, 2015
Bench Bulletin 1
1. Bench Bulletin - Issue 62 July - September 2023

Subsidiary legislation

Title
The National Payment System Regulations Legal Notice 109 of 2014