BANKING LAW EXAM
OCTOBER 2024
Time: 3 Hours
Instructions:
Answer all questions in Section A and any TWO questions from Section B.
Use relevant case laws and statutory provisions where applicable.
SECTION A: COMPULSORY QUESTIONS (60 Marks)
1.(a) Define the term "Negotiable Instrument" and give THREE examples commonly used in
banking transactions. (10 marks)
b) Explain the essential features of a negotiable instrument.
(10 Marks)
2(a)Describe the rights and obligations of a banker and a customer in a banker-customer
relationship. (10 Marks)
(b) What is the purpose of the Central Bank of Kenya (CBK)?
3(a) Discuss the CBK’s role in regulating the operations of commercial banks.
(10 Marks)
(b)Explain the following concepts in banking law:
a) Cheque dishonor
b) Lien
c) Bank guarantee
d) Standing order. (10 marks)
SECTION B: ANSWER ANY TWO QUESTIONS (40 Marks)
[Link] Study:
XYZ Bank issued a loan to a customer but failed to conduct proper Know Your Customer (KYC)
procedures. Later, it was discovered that the customer was using the bank account for money
laundering.
a) Identify the legal consequences the bank could face under anti-money laundering (AML) laws.
b) Discuss the steps the bank should have taken to comply with KYC regulations.
c) What are the penalties under the Proceeds of Crime and Anti-Money Laundering Act
(POCAMLA)? (30 Marks)
5(a) Explain the different ways in which a bank-customer relationship can be terminated.
b) What remedies are available to a customer when a bank wrongfully dishonors a cheque?
6(a) What is the legal significance of a mortgage in banking transactions?
b) Discuss the procedures involved in creating and discharging a mortgage under Kenyan law.
7(a) Describe the legal requirements for opening the following types of bank accounts:
i) Joint account
ii) Corporate account
iii) Minor’s account
b) What challenges might banks face when dealing with joint accounts, and how can these
challenges be addressed?
