In 2018, anti-corruption watchdog Transparency International’s Corruption Perceptions Index ranked Kenya in 27th place (where first place indicates the highest perceived levels of corruption). In September of the same year, the Central Bank of Kenya fined five banks for contravening anti-money laundering laws and regulations.
In recent weeks, President Uhuru Kenyatta has intensified the war on corruption, arguably speaking out more strongly against graft than ever before. A new director of public prosecutions was recently appointed, and there have been arrests of high-profile figures, such as the deputy chief justice and county governors allegedly involved in corruption.
But just how far does this so-called war extend? Jason Braganza, Deputy Director of Tax Justice Network Africa, a pan-African organisation that promotes progressive taxation systems in Africa, told ENACT that ‘while such efforts have been remarkable, it is yet to be seen whether the government will address the issue of illicit financial flows [IFFs] taking root in the country.’
A closer look into the rise in IFFs in Kenya reveals that money is laundered at two different levels: through the regulated economy, using banks; and the unregulated economy, where unaccounted and untraceable transactions find their way into Kenya’s regulated economy.
Ahmednasir Abdullahi, a prominent lawyer in Kenya whose practice covers tax, corporate and commercial law, was reported as saying that ongoing trade and bilateral infrastructure agreements between Kenya and China have opened up avenues for corrupt payments involving both Chinese and Kenyan nationals. With respect to the unregulated economy, Abdullahi alleges that physical cash money is flown into the country as ‘cargo’. He does not say where this money is from, but has argued that it could be linked to the property boom in the capital Nairobi, while the rest of the country’s economy is struggling.
Several related cases have been picked up in recent news media. A Chinese syndicate has reportedly been operating in Nairobi in collaboration with Kenyans, using credit cards to conduct non-existent purchases on goods and services from Kenyans. Apart from credit card fraud, in October 2018, a Chinese company took the Kenya Revenue Authority (KRA) to court after the latter had frozen their bank accounts for being involved in tax evasion, amounting to almost US$22 million between 2015 and 2017. According to the KRA, the company used seven other companies to conceal their funds with the aim of lessening their tax obligations.
During a visit to Kenya in June 2018, US Under Secretary for Terrorism and Financial Intelligence, Sigal Mandelker, recommended strengthening enforcement and regulatory mechanisms to combat IFFs from China and other countries. These included South Sudan and the Democratic Republic of Congo.
Kenya needs to combat money laundering with the same vigour and visibility it uses to address corruption on other fronts. Examples include recent demolitions of buildings that were deemed to have been constructed with fraudulent permits. Lastly, launching investigations, fortifying anti-money laundering compliance efforts through the use of law enforcement measures, and seizing assets from proceeds of crime will also go a long way in curbing transnational crimes.
Mohamed Daghar, Researcher, ENACT project, ISS and Chepkorir Sambu, independent researcher, Kenya.