A tell-tale sign of the financial system’s vulnerability to suspicious transactions is the mushrooming forex bureaus.
I can’t wait to see how the prosecutions and trials of top officials of Kenya Bureau of Standards proceed and how the claims and allegations by investigators will fare when subjected to tough interrogation before magistrates and judges.
As the new crackdown on corruption progresses it is becoming increasingly clear that what this country needs is an elite squad of corruption investigators - economists. procurement specialists and auditors with the skills needed to investigate complex cases such as corruptly-procured roads and buildings, money laundering, or corruption in privatisation transactions.
It seems to me that we will also need professionals with competence to investigate conflict of interest, campaign finance, illicit business cartels, and bribery within the Judiciary and Parliament.
In many African countries where anti-corruption agencies are driven by police investigators, arrests have tended to concentrate on bribe-taking traffic policemen, clerks who issue permits and licences, customs officials, and immigration officials.
The trends we are witnessing in the ongoing investigations suggest that we need an elite squad with a staff complement top-heavy with auditors, accountants, land valuers, quantity surveyors, civil engineers, lawyers, architects, public education professionals and journalists.
Which leads me to the issue of corruption money laundering. This week, the Kenya Bankers Association came up with new guidelines on large cash transactions.
Bank customers will now be required to provide evidence and proof of source of funds when depositing large amounts.
In the world of mobile money and electronic money transfers, I don’t see why people should be allowed to withdraw and carry loads of cash. It makes sense to put limits on large cash transactions because this is how you can track and trace movement of proceeds of corruption.
Still, we have agreed that our banks have not done a very good job in terms of supporting enforcement of anti-money laundering laws. That is why a hairdresser known as Josephine Kabura of the National Youth Service (NYS) infamy was able to receive and bank billions without being flagged.
The story of the infamous housemaid who illegally imported two million sticks of cigarettes is still fresh in our minds. If our banks were strict, she would not have been able to open a letter of credit.
Currently, the law requires commercial banks to report all transactions above Sh1 million to the Financial Reporting Centre (FRC) on a daily basis.
But the problem is that though the FRC receives and processes information on suspicious transactions it does not have a database robust enough to process the information and flag the suspicious ones on a real time basis and at the same time report it to authorities for action.
Underfunded and understaffed, it remains limited in terms of capacity and capability. At times, I feel that part of the problem has to do with the fact that we were forced to adopt the anti-money laundering law by the international financial community when were not ready to do so.
Indeed, it was the Financial Action Task Force (FATF) that forced us to pass an anti-money laundering law in 2012- after threatening to put us on a grey list if we failed to do so by the end of the year.
We must accept that the structure of our banking system lends itself to shady dealings and dodgy transactions. We have too many small banks, most of them owner-occupier entities effectively run by individual owners under no obligation to observe ‘know your customer’ guidelines.
The world over, experience has shown that dodgy banking transactions become the norm in cities with too many small banks, especially in territories with large immigrant and expatriate communities. Why should towns like Kisumu, Eldoret, or Nakuru have more than 10 banks? Why should Eastleigh estate in Nairobi have too many banks?
Yet another tell-tale sign of the financial system’s vulnerability to suspicious transactions is the mushrooming forex bureaus. Today, Nairobi’s central business district is littered with such bureaus competing for survival in a very small market. From little businesses handling small transactions, forex bureaus in Nairobi have grown into large businesses capable of handling large volumes of cash transactions. Clearly, the banking sector is ripe for major restructuring.
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