The mega jackpots paid to punters in Kenya have been flagged as possible avenues for laundering proceeds of theft, drug dealings and terrorism as the State heightens focus on the betting industry.
A money laundering risks review report launched by Interior Cabinet Secretary Fred Matiang’i on Wednesday fingered the popular payouts by betting companies as risks for money laundering.
The State reckons that the risk of betting firm owners using the companies to launder billions of shillings is high.
This could increase pressure for more disclosures on the cash used to pay jackpots, which have hit a high of Sh250 million amid a betting craze that has defied government clampdown through the imposition of higher taxes both on the companies and punters.
However, the law does not require betting firms to report suspicious transactions to the Financial Reporting Centre (FRC)—which is mandated to track illicit cash.
Punters dealing in large transactions, those putting money in their betting wallets and staking a small fraction of it as well as those making small, regular and suspicious bets will also be on the radar of the Central Bank of Kenya (CBK).
“The risks for money laundering were assessed to be high for the owners of betting firms,” says the report.
“The money laundering risk was noted where proceeds from sports betting could be co-mingled with funds from predictable crimes and passed off as genuine winnings with a possible collusion on who takes the winnings which are later either reverted into the syndicate or transferred outside the country,” adds the report.
Kenya has been fingered for illicit money entering the country from crime, drugs, corruption and shady business activities, illustrated by homes in leafy suburbs and luxury cars.
The State has since 2019 stepped up the war on betting sites amid growing concerns that the multi-billion shilling industry is being used to launder money.
The FRC in 2020 opened investigations into SportPesa for possible money laundering in the wake of claims the sports betting firm wired $278 million (Sh33.3 billion) from its local accounts to offshore banks.
Kenyan gamblers won Sh380.53 billion in betting payouts from SportPesa between November 2013 and June 2019 when the company operated under Pevans East Africa, underscoring the scale of the prizes that are fuelling the betting craze.
The amount represents 85 percent of the Sh447.33 billion that gamblers staked in the period, according to Pevans’ audited financial statements and management accounts seen by the Business Daily.
Other betting firms have been flagged for possible money laundering for sending millions of shilling into the gaming accounts of punters.
Banks last year unsuccessfully pushed for changes to the law to compel betting firms to report suspicious deposits and withdrawals from gaming accounts, saying betting sites offered convenient platforms to clean dirty money.
Industry lobby Kenya Bankers Association (KBA) petitioned Parliament to amend the Proceeds of Crime and Money Laundering (Amendment) Bill, 2021 and compel industry regulator Betting Control and Licensing Board (BCLB) to monitor suspicious bets and transactions totalling at least Sh1.2 million ($10,000) and above.
Kenyans spent Sh169.1 billion to place bets through Safaricom’s M-Pesa in the year to March, underlining the gambling craze that has become a national pastime.
The telecoms operator’s disclosures show that the value of bets jumped 23.8 percent from Sh136 billion a year earlier.
Safaricom, the Kenya Revenue Authority (KRA) and betting firms are the biggest beneficiaries of the growth and intensity of betting activities, pocketing billions of shillings.
Betting is popular among young people – employed as well as the jobless — who see it as offering a game-like thrill besides an opportunity to make quick money.
While a few punters get lucky and win large sums of money, the activity exposes participants as a whole to missed opportunities and losses.
The Sh169.1 billion wagered in the review period, for instance, is enough to buy 5.83 billion shares of Safaricom, equivalent to a 14.5 percent stake in the country’s most profitable firm.
Such a stake would earn dividends of about Sh7.3 billion annually, based on the telco’s distribution of Sh1.39 per share for the year ended March.