KRA to freeze suspect NGO cross-border money deals
Times Tower, the KRA headquarters.
Falsely declared or undeclared cross-border cash transactions by NGOs have been flagged for confiscation by the Kenya Revenue Authority (KRA) as potential channels of laundering proceeds of terrorism, theft or drug dealings.
A money laundering risks review report by the state recommended that the taxman holds suspicious cash deals by the NGOs to enable investigators to establish their source of funds.
“Measures should be put in place to properly implement the cross-border currency declarations on a real-time basis. In addition, KRA should utilise its powers to temporarily freeze the movement of funds across the border where it is deemed necessary arising from suspicion, to allow authorities to establish the source of funds,” the report recommends, pointing to heightened pressure on NGOs to improve disclosure of the billions transacted cross-border.
KRA enforcement units have powers to use various databases to pursue suspected tax cheats, including bank statements, import records, motor vehicle registration details, Kenya Power records, water bills and data from Kenya Civil Aviation Authority.
Potential target
NGOs handle billions of shillings every year, making them a potential target for money laundering schemes.
According to the regulator, the 2,816 NGOs active in Kenya received Sh158.7 billion in fiscal 2019/2020—a four per cent drop from the Sh165.9 billion reported in the previous year.
In fiscal 2019/20, NGOs spent Sh84.4 billion on executing projects, with 75 per cent of the amount or Sh63.6 billion going to projects in Kenya.
This was a 19 per cent drop from the Sh78.8 billion spent in 2018/19.
The NGO Board data shows that the most funded sector was health at 33 per cent, followed by education at 14 per cent and children at 13 per cent. Relief and disaster support took up eight per cent of the amount.
Confiscate suspected dirty cash
The report recommends that the state pursues changes to the law to enable the Financial Reporting Centre to temporarily confiscate suspected dirty cash.
“The authorities should aggressively pursue as a matter of policy, the confiscation of falsely declared or undeclared cross-border cash transactions.
“The assessment proposes that legal reforms should enable the FRC to temporarily freeze or detain any suspicious transaction brought to its attention by the customs or border authorities and reporting institutions to allow for analysis and establishment of the source of funds,” it said.
