By Alex Sifuna
Millions of bank customers are facing unexpected financial disruption after commercial banks moved to deactivate more than 33 million dormant accounts, effectively freezing billions of shillings in unclaimed deposits.
The sweeping action, carried out across multiple financial institutions, is part of a broader compliance push aligned with regulatory directives aimed at curbing fraud, improving transparency, and enforcing stricter “Know Your Customer” (KYC) requirements.
According to industry regulators, the accounts targeted in the exercise had remained inactive for extended periods—some for several years—without any customer-initiated transactions.
Under existing banking regulations, accounts that show no activity over a defined period are classified as dormant and may be restricted or closed altogether.
The Central Bank of Kenya (CBK) has long required financial institutions to monitor inactive accounts and take appropriate action to safeguard funds and prevent misuse.
“Dormant accounts pose significant risks, including exposure to fraud and identity theft. Financial institutions are required to either reactivate such accounts through customer verification or transfer the funds in accordance with the law,” a senior CBK official said.
Preliminary estimates indicate that billions of shillings are now effectively frozen, with customers unable to access their funds until they complete verification procedures.
While banks insist the money is safe, affected customers have reported frustration over limited communication and lengthy processes to regain access.
Some customers only discovered their accounts had been frozen when transactions failed or debit cards were declined.
“I tried to withdraw money, but my card was rejected. When I went to the bank, I was told my account had been dormant and needed reactivation,” said a Nairobi-based customer.
A significant portion of dormant account funds may ultimately be transferred to the Unclaimed Financial Assets Authority (UFAA), a state agency mandated to hold and manage unclaimed financial assets on behalf of owners.
Under Kenyan law, funds from accounts that remain inactive for a specified period—typically several years—must be surrendered to UFAA. Owners can later reclaim the money after verification.
UFAA data shows that billions of shillings have already been transferred from banks, insurance firms, and pension schemes over the years due to inactivity.
Commercial banks have defended the mass deactivation, saying it is necessary to comply with regulatory standards and protect customers.
The Kenya Bankers Association (KBA) noted that the exercise is not a seizure of funds but a procedural requirement.
“Customers should not panic. The funds remain intact. Account holders simply need to update their details and complete reactivation steps,” the association said in a statement.
Banks have urged customers to visit branches or use digital platforms to update identification documents, contact details, and transaction profiles.
Despite assurances, consumer groups have raised concerns over the scale and execution of the exercise.
Some argue that banks failed to adequately notify account holders before freezing access.
“There is a communication gap. Many customers were not given sufficient notice, and the reactivation process can be cumbersome, especially for those in rural areas,” said a financial rights advocate.
Others worry that vulnerable groups—including the elderly and Kenyans living abroad—could struggle to reclaim their funds.
The crackdown comes amid a wider transformation in the banking sector, driven by digitization and tighter anti-money laundering (AML) regulations.
Financial institutions are under increasing pressure to maintain accurate customer records and eliminate accounts that do not meet compliance thresholds.
Advances in data analytics have also made it easier to identify inactive or suspicious accounts at scale.
Analysts say the move reflects a global trend in banking, where regulators are pushing for cleaner, more transparent financial systems.
