Sh800bn laundered via amnesty, US says

What you need to know:

  • Most of the cash wired back was from India, Mauritius and the Seychelles, but it was not tracked.

  • It enabled Kenyans to repatriate money from offshore accounts without revealing the source.
  • In 2018, the CBK fined several banks for failing to report suspect transactions.

The United States says an amnesty offered by Kenya in 2018 facilitated the laundering of more than Sh800 billion because the taxman did not have a policy to monitor the inflows.

In 2016, Treasury Cabinet Secretary Henry Rotich offered an amnesty designed to facilitate tax payments.

It enabled Kenyans to repatriate money from offshore accounts without revealing the source.

According to the International Narcotics Control Strategy (Money Laundering) Report released by the US Bureau of International Narcotics and Law Enforcement Affairs yesterday, the Kenya Revenue Authority (KRA) failed to adopt a policy to confirm if the money was actually returned.

“KRA has been unable to trace approximately $7.9 billion (Sh803 billion) … or to confirm that the registered funds were not transferred out of Kenya again, raising concerns the amnesty facilitated laundering of illicit cash,” the report said.

Mr Rotich has since been dropped from the Cabinet.

In 2016, Kenya amended laws to provide an amnesty on income declared for that year by a person who earned taxable income outside the country.

However, not many people took up the offer, prompting Mr Rotich to extend it twice.

“Even with the extension, the uptake of the amnesty has been low, mostly because there were concerns that when the money is returned, there will be questions on its source,” Mr Rotich said in 2018.

The amnesty issued during the 2018/19 budget presentation offered a blanket buffer, allowing Kenyans to repatriate their money tax-free with no questions asked, opening a window for laundering.

The Nation understands that the bulk of the money was wired from India, Mauritius and the Seychelles, but KRA failed to track it or confirm if it was rewired back as “clean cash”.

The US added that Kenya’s financial institutions still engage in currency transactions connected to international narcotics trafficking.

A significant amount of this cash is dollars derived from sales in both countries.

It also said the banks are vulnerable to money laundering, fraud and terrorism financing.

Just last week, Standard Charted Bank, through its parent company Standard Chartered Plc, revealed that it opted to pay Sh100 million to save its executives from prosecution for failing to report suspicious transactions connected to theft of National Youth Service funds.

The bank has paid Sh178 million over the misstep.

In 2018, CBK fined Standard Chartered, Equity, Diamond Trust, Co-operative and KCB banks a total of Sh392.5 million.

CBK said the banks failed to report large transactions and did not undertake due diligence on customers.

It also accused them of approving large transactions without proper documents.

KCB was fined Sh149.5 million, Equity (Sh89.5 million), StanChart (Sh77.5 million), DTB (Sh56 million) and Co-op (Sh20 million).

The report also flags the country’s fledging mobile money industry as a conduit for laundering.

“Mobile money lenders are not regulated despite more than 50 active digital loan applications. Tracking and investigating suspicious transactions remains difficult. Lack of oversight and enforcement, coupled with inadequate reporting, increases the risk of abuse,” the report says.

Unregulated networks of 'hawalas' and other unlicensed remittance systems also expose the country to crimes involving cash.

The report adds that the growing volume of transactions involving designated non-financial businesses and professions is also a likely vehicle for laundering.

The US says Kenya’s money-laundering laws are weak, with criminals having a field day.

The National Assembly is accused of failing to pass amendments to the Proceeds of Crime and Anti-Money Laundering Act to extend reporting requirements to lawyers, notaries and other independent legal professionals, whom it accuses of being used to clean dirty money.

“The Act as amended, provides a comprehensive anti-money laundering framework. Covered entities reporting to the Financial Reporting Centre are subject to know-your-customer and suspicious transaction report rules and have enhanced due diligence procedures,” it says.

The reporting requirements have been extended to include trust and company service providers; however, lawyers and notaries remain unsupervised and not subject to these obligations,” it says.

One of the challenges the countries anti-money laundering enforcement agencies face is confidentiality, with leaks over impending seizures and arrests compromising their operations, a loophole the US says exposes the country further.

“To demand bank records or seize an account, police must obtain a court order by presenting evidence linking the deposits to a criminal violation. Confidentiality of this process is not well maintained, allowing account holders to be tipped off and providing an opportunity to move assets. Bureaucratic and other impediments may hinder the investigation and prosecution of financial crimes,” the report said.


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