How we chase away investors

investor

Overzealous application of anti-money laundering laws may inadvertently lead to diversion of transactions from more to less transparent channels.

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Famous US-based Nigerian serial technology entrepreneur Olubukunmi Olufemu Damuren was recently in Nairobi for the inauguration of President William Ruto. Mr Damuren and his compatriot, Mr Eghosare Nahikhare, are the ultimate beneficial owners of RemX Capital Ltd, OIT Africa Ltd, Multigate Ltd and Pumicells Ltd, the companies, which own cash remittance platforms serving a lucrative remittance corridor linking mainly diaspora Nigerians to their country from bank accounts based in Kenya.

The four firms, which had been under investigations by anti-money laundering agencies, were recently cleared by the High Court. A total of Sh52 billion that had been frozen in their bank accounts for more than six months was defrosted.

When I caught up with him at a hotel lobby in Nairobi last week, Mr Damuren was more than eager to ventilate on a range of issues. These include his harrowing experience of enduring six months at the hands of Kenya’s criminal and anti-money laundering agencies, the political context and backdrop against which the probe was being conducted, disruption of business for six months and reputation damage and risk which the four companies were exposed to, and whether the four payment and remittance businesses had a chance of recovering.

Credible banks

Mr Damuren summed up his tribulations thus: You have been doing business in a country uninterrupted for a whole two years. Your business does not involve cash because all payments are done electronically, where all transactions can be tracked and traced. You have entered into payment collection agreements with big and credible banks in Kenya to enable you to ride on their online collection gateways for collections.

All payments are through commercial banks that are regulated and regularly inspected by the Central Bank of Kenya, and which must report all suspicious transactions to the Financial Reporting Centre.

Then you wake up one morning and you are told all your accounts have been frozen and that your companies are under investigation for money laundering. You are also accused of funding Dr Ruto’s campaign.

The local press has declared open season on you, publishing the allegations without nuance and inflating your alleged sins to biblical proportions. At one stage, the local press is awash with reports that your companies are under investigation by Interpol. But when Interpol writes to dispute that, you don’t hear another word in the media, even after the Directorate of Criminal Investigations (DCI) also confirms, in writing, that Interpol was not involved.

Six months later, the witch-hunt abruptly stops with the High Court declaring that no witches have been found. The DCI writes a letter stating: “I would like to confirm that the allegations of money laundering and card fraud made against the above entities and persons could not be established.” It  is followed by another from the Asset Recovery Agency (ARA) that says: “The Assets Recovery Agency hereby withdraws wholly the forfeiture applications on the company’s bank accounts.”

“Am I supposed to be happy that the courts have vindicated me?” Mr Damuren asked, the sarcasm undisguised. Mr Damuren said he was forced to source very expensive credit lines to complete payments during the six months his business was frozen. “Being accused of money laundering in the international financial space is like being accused of terrorism in the criminal justice space,” he remarked.

As we parted, several questions were in my mind. Is this a case of lack of skills and capacity in investigating complex digital transactions or a matter of overzealous application of anti- money laundering laws? Or is it a case of unintended consequences of enforcement of anti-money laundering laws and regulations?

Preventing money laundering is an imperative for banks. Yet the flip side is the risk of de-banking money transfer operators and disrupting activity in major remittance flow corridors. This is a big policy question for Kenya because remittances have in recent years surpassed tea, coffee, tourism and horticulture as our biggest foreign exchange earners.

Overzealous application of anti-money laundering laws may inadvertently lead to diversion of transactions from more to less transparent channels. Wholesale profiling of major diaspora remittance flow corridors must be avoided. Many Nigerian entities in the remittance space have been complaining of authorities here profiling them. An authoritative source informed me the other day that President Muhammadu Buhari himself made calls to Nairobi to intervene on behalf of Nigerian firms.

Several years ago in the UK, we saw a number of government agencies teaming up to save the Somali corridor of diaspora flows from collapse. In the US, legislators passed the Money Remittances Improvement Act in a bid to reduce the regulatory burden on money remittance platforms. There are major policy implications here.

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