Analyse diaspora remittances for financial crimes

Criminals have turned to use of proxies in entity registration and management. FILE PHOTO | NMG
Criminals have turned to use of proxies in entity registration and management. FILE PHOTO | NMG 

As authorities spend sleepless nights in efforts to effectively monitor financial transactions, criminal enterprises have equally upgraded to beat the improved surveillance.

Over the years, several regulations have been passed and regulatory bodies are also working. The Public Officer Ethics Act (2003) introduced declaration of wealth to facilitate lifestyle audits and point out scenarios of sudden accumulation of wealth.

Others were Proceeds of Crimes and Money Laundering Act, 2009. The law introduced regulatory bodies of Financial Crime Centre and Asset Recovery Unit which have the mandate of monitoring as well as leading the recovery of assets acquired with criminal proceeds.

In 2016, the country enacted the Anti-Bribery law that extends to the private sector.

All these laws have forced criminals to go back to the drawing board for more complex networks to transact, hide and clean their loot.

One, financial sector criminals have turned to use of proxies in entity registration and management. Just like use of mules in transportation of narcotics, proxies are used to register and operate accounts on behalf of criminals.

Most of these proxies have no relations with their masters, making it difficult to crack their code.

The recent anti-corruption agency report exposed the rot at the counties. But it would be difficult to trace officers involved in the looting because aware that they would be trailed, they leave no visible marks.

Overtime, most have drifted to operating charity organisations as smoke screens for their work. Almost to a man, they have foundations whose projects are undefined and process of funding is unclear.

Secondly, the international trade platforms have provided a proper chance due to the complex crossborder nature. Daily, millions are wired out for settlement of imports. However, the authorities have no monitoring systems to ensure that an equivalent value of goods is shipped in.

Also, some of these funds are wired back and grouped as diaspora remittances. For the last decade, the remittances have grown exponentially from an average of Sh2.5 billion monthly in 2004 to the current average of Sh18 billion.

This translates to more than Sh200 billion a year. It would be prudent to develop a mechanism of marching outgoing wire payments with incoming imports. Its also imperative to analyse the remittances to rule out any kiting.

For the last decade, the real estate has overtaken agriculture and tourism sectors. However, the sector is largely unregulated, making it an easy target for financial criminals.

By registering and operating several companies and unregulated saccos, they are able to create a complex web. The regulation only focuses on deposit-taking saccos and microfinance while the rest are under the department of Co-operatives with limited capacity to monitor their operations.

Internet-based gambling has created a new avenue for financial criminals to hide their loot since they operate cross-border. It is, therefore, high time we intensified our monitoring.

Thiongo Irungu is senior compliance officer- Anti-Money Laundering and Regulatory Compliance.