Tax broker suspected of defrauding KRA Sh120m locked up for three days

Milimani Law Courts

The Milimani Law Courts in Nairobi. 

Photo credit: File | Nation Media Group

What you need to know:

  • Magistrate directs that the accused be detained for three more days since he had been in custody for seven days.
  • The suspect was arrested in Nairobi on Mashujaa Day and whisked away by DCI officers attached to the economic and commercial crimes unit.

A tax broker suspected to have teamed up with other cybercrime fraud operatives to defraud the Kenya Revenue Authority (KRA) Sh120 million in revenue, has been detained for three more days.

Mr Joel Mbugua Ndung'u who is said to have been on the run for several months, was produced before a Milimani Senior Principal Magistrate Gilbert Shikwe on October 24, 2023.

The magistrate on Friday directed Mr Ndung’u to be detained at Muthaiga Police Station for three more days to allow the investigators to conclude the investigation and produce him before court on Monday.

Ndung'u is suspected to be part of a tax syndicate that defrauded the taxman of up to Sh120 million.

The Chief Inspector of Police Nobert Kioko, who is attached to the Economic and Commercial Unit of the Directorate of Criminal Investigations (DCI), earlier requested to detain Ndung’u for 14 days to assist detectives from the investigations bureau to get crucial leads aimed at arresting and combating the tax syndicate.

Mr Kioko informed the magistrate that the suspect was arrested on October 19, 2023, after being tracked since August when he slipped a police dragnet at Mombasa where he had been located technologically.

“The respondent (Ndung’u) had switched off all his known mobile phones which he allegedly uses to hack into the KRA tax systems to defraud importers fifty percent of the tax amount,” Mr Kioko stated.

On the evening of Mashujaa Day, the suspect was arrested within Nairobi and whisked away by DCI officers attached to the economic and commercial crimes unit.

The court heard that Mr Ndung’u is being investigated for fraud and theft of public funds.

Between the months of September and November 2022, KRA lost Sh120 million through a well-orchestrated tax evasion scheme that involved taxpayers (importers), tax agents, brokers and KRA staff.

Mr Kioko explained to the court that the tax agents lodged an entry with the Integrated Customs Management System (ICMS), upon which an E-Payment slip (E-Slip) is generated for payment of customs duty.

“The importers are made to believe there is an Organization with a Credit Line which is usually utilized in payment of customs duty only,” the magistrate heard.

As a consequence, the importers are asked by the tax agents to allow them pay the total customs duty on their behalf “after which they would pay 50 per cent of the total duty due thus saving half the amount.”

“With the promise of saving 50 per cent , the importers would allow the Tax agents to share the E-Slip which would in turn share  it with individuals who would access KRA systems and transition the Entry to- Under Control Status (UCS) without payment of tax,” Mr Kioko stated.

After transitioning of the entries to the UCS status, the brokers would then demand 50 per cent of the “total customs duty” from the importers.

The magistrate, was told the tricked importers would deposit the monies into M-Pesa and Bank Accounts of the “rogue tax brokers.”

The money is therefore shared among individuals involved in the scheme.

“A total of 129 entries with a Customs Duty value of over Sh120million, were cleared without payment of taxes,” Mr Kioko stated.

Mr Ndung’u the court heard is “believed to be one of the rogue tax brokers (RTB) involved in receiving and forwarding the E-Payment Slips to persons who access the KRA systems and thus transitioning entries to UCS.”

The crime detectives recovered two mobile phones from the suspects which have been passed on to the cybercrime unit for forensic analysis.

The crime detective said the respondent (Ndung’u) received cash from tax agents and other tax brokers in the pretext of assisting them save 50 per cent of the total duty.

The magistrate directed the suspect to be detained for three more days since he had been in custody for seven days.

"The suspect has been in custody for seven days where I am hoping the officers investigating the matter had been doing so and there are no compelling reasons to detain him for 14 days," said the magistrate.

The court ordered the suspect to be detained for three more days and be presented before court on Monday, October 30, 2023, for further directions.