Kenyan officials handling money-laundering investigation files are tipping account holders of suspicious transactions to move their assets before raids, hampering the fight against money launderers.
A new US report tracking the global money-laundering hotspots also says Kenya appears to have taken a step back in the fight after last year it lifted the threshold of reporting cash transactions above Sh1 million.
Before 2021, the Central Bank of Kenya (CBK) required commercial banks to record and report all transactions above Sh1 million (approximately $10,000).
However, in October 2021, President Uhuru Kenyatta ordered the lifting of the reporting requirement. He noted that a higher cash transaction limit “will facilitate easy transactions for micro, small and medium enterprises and help the economy respond to Covid shocks”.
The US State Department said in its annual International Narcotics Control Strategy Report (INCSR) released this week that Kenya has no individual reporting requirement in place for large cash transactions, although banks must report to the Financial Reporting Centre (FRC).
"Kenya’s proximity to Somalia makes it an attractive destination for funds from unregulated Somali sectors, including the khat and charcoal trades," the report notes.
The report pointed out that goods reported at points of entry as transiting Kenya were not subject to customs duties, but authorities acknowledged many such goods were sold in Kenya.
"Trade is often used to offset transactions in regional hawala networks (informal value transfer system based on the performance and honour of a huge network of money brokers)."
It noted that to demand bank records or seize an account, police must obtain a court order by presenting evidence linking the deposits to a criminal violation.
"Confidentiality of this process is not well-maintained, which leads to account holders being tipped off and relocating their assets,” read the money laundering hotspots report.
It warned that money lenders are not closely regulated despite the widespread use of mobile lending applications.
“Safaricom’s M-Pesa system’s two banking products, M-Shwari and KCB M-Pesa have over 30 million unique customers between them,” it said.
“Kenya’s enforcement regimes are legally sound, but authorities lack the resources, and perhaps the will, to enforce them with vigour.”
The US Department of State submitted the 2022 edition of the report to the American Congress on Tuesday.
The report assesses foreign governments’ efforts to reduce illicit drug production, trafficking, and use as well as their work to counter drug trafficking-related money laundering.
The US sees Kenya as “a transit hub for both east and central Africa used by international traffickers of narcotics, persons, weapons, wildlife, timber, charcoal, and minerals.”