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How billions of dirty money is laundered out of Kenya

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By Steve Umidha

Hundreds of billions of shillings is being laundered out of the country through Europe every year, but the government is unable to give a precise figure of the scale of the problem, various findings now show, with a perturbing credence that the scope of such losses could be much higher.

It is estimated that Kenya has been losing an average of Sh40 billion every year through illicit financial flows since 2011, as government, local firms and multinationals engage in fraudulent schemes to avoid tax payment. This figure is now thought to be just a cosmetic measure.

In one report by Tax justice network (TJN) for instance – the organization says the scale of the problem in the country was very uncertain with estimates ranging from hundreds of billions of shillings and possibly trillion upwards and whose only solution lies in firming Kenya’s money laundering laws.

“Strengthen Kenya’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) frameworks.”

“This is because an existing amendment to the Tax Procedures Act 2015, introduced by the Finance Act 2018, weakens current financial reporting, investigations and surveillance mechanisms carried out by the Financial Reporting Centre (FRC), and other various financial institutions such as the Central Bank of Kenya (CBK) plus other financial sector regulators as mandated by law,” it noted.

“If in one exposé you are able to estimate that a country loses Sh 6 trillion, that points to how our knowledge of the problem is just the tip of the iceberg,” explains Alvin Mosioma, the Executive Director of TJN – who not only blames toothless trial agencies like Directorate of Criminal Investigations (DCI) and Ethics and Anti-Corruption Commission (EACC) but also tax negotiations Kenya has been signing with certain countries.

Indeed in 2019, the Base Institute of Governance in its Basel AML Index 2019 which reviews money laundering and terrorist financing risks around the world, also ranked Kenya as one of “major money laundering countries” for narcotics-related money laundering. The report further said it found, ‘existing data on corruption and bribery.’

“Mozambique, Laos, Kenya, Afghanistan, Cape Verde, Benin, Liberia, Vietnam and the Cayman Islands are defined by the INSCR Vol. II as “major money laundering countries” for narcotics-related money laundering,” the report reads in part.

In 2018, Kenya wrote to at least seven countries including Dubai seeking details of billions of shillings suspected to be stashed abroad by influential individuals, including politicians and businessmen, after a trove of leaked documents suggested in July that Kenya was among African countries that could be losing huge amounts of tax revenue with investors using Dubai’s attractive tax regime to stash the stolen money.

“Dubai is a place to launder artisanally mined gold, especially from conflict-prone parts of East and Central Africa. Opaque business practices and regulatory loopholes allow this laundered gold to enter world markets on a massive scale,” a report authored by Mathew Page and Jodi Vittori revealed in July this year.

EACC and DCI had at the time confirmed that the office of the Attorney-General had reached out to the seven nations seeking information about bank accounts and assets in the names of Kenyan citizens, which are suspected to have been proceeds of corruption. The two institutions are yet to make public their findings two years later.

Two months before the damning report titled Dubai’s Role in Facilitating Corruption and Global Illicit Financial Flows was released in which featured prominently as a nation aiding money laundering activities, an undercover report by EU Commission had also in found East Africa’s largest economy was assisting well-placed personalities to siphon public funds and moving them to offshore countries like Mauritius and Luxembourg with the help of western consulting firms.

EU then in May this year said it would step up scrutiny of financial assets controlled by politicians and company owners in an effort to clamp down on money laundering, after placing Kenya in the watch list of notorious countries helping individuals hide money from the rule of law.

Those tax havens are now believed to be growing in numbers, thanks to Double Taxation Agreements (DTAs) Kenya signed with some – and whose sincerity are now being question by some quotas who believe are being used in promoting financial secrecy and opacity in the negotiation of treaties, and their linkages to tax havens.

Seychelles, South Africa, Netherlands and Mauritius are ranked as the most aggressive and extensive tax haven jurisdictions that are used by multinational enterprises to avoid paying tax, thereby eroding revenues of other countries, more so in the developing world such as Kenya.

The vast majority of financial, businesses in betting firms, and real estate transactions are associated with illegal activity in this country, part of what underpins Kenya’s opulence in a steady stream of illicit proceeds from corruption and crime.

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