Anti-money laundering agency flags terror financing risk in banks

Director General Financial Reporting Centre (FRC) Saitoti Maika.  

Photo credit: File | Dennis Onsongo | Nation Media Group

The Financial Reporting Centre (FRC) has flagged foreign ownership of some local banks in Kenya as presenting terrorism financing risks in the latest assessment of the country’s exposure and preparedness to fight dirty cash.

The agency has also raised concerns over the elevation of the risk with more Kenyan multinational banks expanding into countries that host terrorists.

The agency in the joint report with other State agencies, did not however disclose particular markets or countries in the disclosures that are set to heighten focus on the use of financial institutions to move money used in financing terrorism.

Kenya is currently in the United Nations ‘grey list’ which refers to countries whose safeguards against the inflow of cash tied to terrorism or money-laundering are weak.

“The threat in Kenya is further exacerbated by the emergence of local banks domiciled in countries where active terrorists are having significant shareholding in financial institutions,” the National Terrorism Financing Risk Assessment Report says.

“There is also the presence of Kenyan bank subsidiaries and branches in the Democratic Republic of Congo (Congo DR), Uganda, South Sudan, Somalia and Tanzania and as such are prone to misuse for Terrorism Financing.”

The report by the FRC and the other agencies spearheading the fight against money laundering and terrorism financing did not however disclose amounts moved through local branches and those in other countries.

However, the report shows that Somalia-based Al-Shabaab has annual revenues of $100 million (Sh13 billion at current exchange rates).

The report says that as a result, there is a growing risk of groups such as Shabaab and the Allied Democratic Forces from DR Congo and their sympathisers penetrating Kenya’s financial systems.

Kenya is a strategic economic hub in the region, ranking way ahead of her neighbours in financial inclusion and hosts international banks from the rest of Africa, Asia, Arabia, Europe and America.

Terrorism financing involves the raising and moving of money to finance terror groups to acquire arms or carry out attacks.

Kenya recently gazetted regulations with stiff penalties for banks, and officials found guilty of unauthorised release of frozen funds or assets will be fined Sh20 million (for entities) while the officials face up to 20 years in jail.

The regulations come months after the Financial Action Task Force—an intergovernmental organisation that develops policies to combat money laundering and terrorism financing— included Kenya in the list of countries at higher risk of being used as an avenue for the two crimes.

Kenya has suffered multiple terrorist attacks over the years.

Most of the attacks have been linked to Al-Shabaab, a move that prompted Kenya to send its military to Somalia as part of a joint African Union security mission.

Kenya has however started withdrawing its troops from the neighbouring country as Somali security forces are set to take full control.

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