CBK orders financial institutions to freeze Bangui assets

Kenyan financial institutions have been ordered to freeze assets belonging to individuals and firms behind the Central African Republic (CAR) violence, where thousands have been massacred or displaced since last year.

Central Bank of Kenya (CBK) assistant director in the Bank Supervision Department Matu Mugo issued the circular to comply with United Nations Security Council Resolution No. 2134, following the deterioration of the situation in the country.

Fighting erupted in March 2013 after rebels led by Michel Djotodia forced President Francois Bozize out of the capital Bangui and into exile.

The CBK said banks, mortgage finance companies and microfinance banks should get ready as a list of the targeted individuals and other entities would be released by the United Nations Security Council Committee.

“Commercial banks, mortgage companies and microfinance banks are directly affected by Paragraph 32 of Resolution 2134 of 2014. …The Committee will issue a list of designated individuals and entities to enable member states to implement Paragraph 32,” said Mr Mugo in the circular.

Paragraph 32 of the resolution said that the Security Council had instructed all member states to “freeze without delay all funds, other financial assets and economic resources which are on their territories, which are owned or controlled…by the individuals or entities designated by the Committee.”

The CBK drew attention of the banks to “a total breakdown in law and order, the absence of the rule of law and religiously-motivated targeted killings and arson.”

It was not immediately clear whether there were particular assets targeted in Kenya, but a CBK supervision official said the directive issued regulators could as well be meant to stop any money filtering into the system after the circular was issued.

CAR is a Francophone country that is linked to global networks of animal trophy and arms trafficking. Nairobi has become a hub for political and business elites in the region, as it has the most developed financial market in sub-Saharan African outside Nigeria and South Africa.

“You know it is not necessarily that there are such assets here but at times this is to address any money that tries to enter the system after the circular is issued,” a bank supervision officer who is not authorised to speak to the media said.

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Analysts, however, said the depth of the problem in CAR was not amenable to “token solutions” like freezing of assets since the protagonists are more concerned about power and not what they may hold in Western capitals or elsewhere.

Macharia Munene, an international relations lecturer at Nairobi’s United States International University, said the UN was free to ask its member states to freeze assets, but added that hardly any national conflicts were resolved that way.

“The protagonists in Central African Republic are interested in power and are probably not worried about some assets they may hold in London or Nairobi or elsewhere,” said Prof Munene.

Kenya Bankers Association CEO Habil Olaka, however, said he had not received the circular, but noted that there was a system in place to deal with issues of money laundering such as involves freezing of assets.

“Banks are under obligations under the international Financial Action Task Force (FATF) to monitor any sanctions list and report any activities they detect in that respect to the Financial Reporting Centre here in Nairobi. I have not seen the circular, but the system in place works,” said Mr Olaka.

The CBK said that the implementation of the UN resolutions is on a progressive basis and members states would be expected to report on the status of its implementation to the Security Council’s Committee on CAR.

The resolutions also included the provision that the individuals or entities do not benefit from the assets even through proxies.

Kenya is supposed to report to the Council’s Committee on CAR within 90 days from the day the UN adopted the resolution on January 28 this year and the circular is dated April 1.

“In view of these two UN Security Council resolutions, all institution are advised to … continuously monitor the proceedings of the …Committee and the decisions thereof and establish whether a list of designated individuals and entities has been issued,” said Mr Mugo.

He further said the institutions are to “report to the central bank on the steps taken and the results thereof on the implementation” of the resolutions.

“Once a list has been issued by the UN Security Council Committee on CAR, you will be required to implement the requirements of Regulation 27(3) of the Proceeds of Crime and Anti-Money Laundering Regulations 2013,” said Mr Mugo.

The UN has previously listed people and entities for asset freezes as punishment for major crimes, such as genocide.

One CAR company called CentraAfrican Airlines based in Bangui and also in the United Arab Emirates remains on a UN list of people and firms whose assets were supposed to be frozen by UN members.