Commerce

Why Kenya risks losing the fight on money laundering

Thursday, February 24th, 2022 02:38 | By
PHOTO/Courtesy

Kenya has been accused of turning a blind eye to money laundering practices which continue to make East Africa’s largest economy an attractive destination for dirty money.

Administrative loopholes, coupled with weak enforcement strategies still stand on the way of the country’s ability to make public the list of individual owners of “shell” companies hiding ill-obtained money in foreign bank accounts with the intention to avoid paying taxes.

The concern comes even after the Kenyan legislators introduced an amendment to the Companies Act of 2015 through section 93A in October 2020, which required companies to disclose the beneficial owners of their shares in their registry of members.

Beneficial owner under the Act is defined as any natural person who ultimately owns or controls a registered company or on whose behalf transactions are made.

But nearly two years since the move was activated, the Beneficial Ownership e-registrar is yet to be accessible to the general public, despite the law being in operation.

It is for this reason that experts now believe that the fight against money laundering and illicit financial flows across Kenyan borders could be far from over with agencies tasked to crack down on corrupt and criminal actors also underfunded.

“During the budgeting process, efforts should be made to ensure that there is an allocation of money to create relevant agencies such as revenue authorities and customs services,” a report by Tax Justice Network Africa (TJNA), a research and advocacy organisation says

Others, according to the African Parliamentary Network on Illicit Financial Flows and Tax brief, are anti-corruption agencies and financial intelligence units.

Illicit capital

In the wake of multiple prosecuted cases in Kenya, it emerged from the network that people who facilitate the flow of illicit capital make use of legal vehicles such as companies and trusts to hide their ill –gotten wealth with the monies hoarded in offshore accounts.

Money laundering is the illegal process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding with Kenya’s booming real estate sector also widely believed to be a magnet for tainted money.

Property developers and real estate agents, for instance, are known to accept huge sums from politically exposed persons holding senior public positions and their associates as well as other suspicious buyers who prefer to “invest” their stolen money in the con of buying lands and houses.

Over the years, Kenya – the largest trading hub in East Africa has been faulted as the region’s complicit country in helping individuals hide money from the rule of law, a tag that has shielded potential investors from investing in the country.

Global economies

A recently undertaken study by Financial Secrecy Index (FSI) on selected global economies, showed that, the country’s influential institutions were aiding the high and mighty both in public and private sectors to siphon public funds and move the “black money” to tax havens with the help of western consulting firms.

Kenya’s Ethics and Anti-Corruption Commission (EACC) and the Directorate of Criminal Investigations (DCI) had in 2018 for instance confirmed that the office of the Attorney-General reached out to seven nations seeking information about bank accounts and assets in the names of Kenyan citizens, which were suspected to have been proceeds of corruption.

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