With the General Election around the corner, and with the pressure on the corrupt elite to raise campaign funds mounting, it seems to me that criminal elements may just overwhelm our regulators by identifying new channels of laundering the money they have been hiding abroad back into the country
I am astonished at the revelations coming through the proceedings where the Assets Recovery Agency (ARA) is investigating suspicious transactions amounting to Sh25 billion. The suspects are said to be aligned to a prominent politician.
It seems to me that criminals and the corrupt elite are fighting to be ahead of regulator and are targeting the weakest links in our financial systems. In the current case, we are learning poignant lessons about laundering through money remittance platforms and currency exchange gateways.
We have learnt how the money remittance businesses and players may have become unwitting or witting participants in money laundering activities.
Laundering through remittance providers pose major regulatory enforcement challenges to the Central Bank of Kenya, the Financial Reporting Centre (FRC), the ARA and other players within the criminal justice system in general.
Why has the remittance business become the weak link? First, speed. To move, hide and eventually use the money generated from corruption and other illegal activities, the speed at which the funds move is critical.
Secondly, as we have seen in the current case, remittance platforms and gateways are able to use wire transfers through banking institutions. The cartels make owners and managers of our banks to operate like mules that are ready to allow their banks to be used by criminals at a fee.
Even though the Sh25 billion case is still under investigations, the manner in which the transactions are structured was reason enough to raise eyebrows. I say so because where transfers are from an unusually high number of people — often from different countries and in different currencies — the signal is that you are dealing with an organised network.
When you are dealing with too many transactions between companies incorporated in countries with low or no taxation, you have a good reason to be suspicious.
Clearly, these criminals have become increasingly sophisticated at penetrating our financial systems. We must make the prevention of money laundering one of the highest security enforcement priorities of our time.
Indeed, this is a good conjuncture to assess the powers and role of the FRC and debate what needs to be done to make this entity play a bigger role in the prevention of money laundering.
We created the FRC hurriedly in 2012 because of pressure from the Financial Action Task Force (FATF) — the international body that co-ordinates compliance by banks and financial institutions to regulations governing anti-money laundering laws.
We passed the anti-money laundering law very reluctantly and only agreed to create the FRC after we were threatened with a black-list by FAFT and when we realised that we risked losing correspondent banking relationships with the rest of the world if we did not pass an anti-money laundering law within the time-frame we were given.
Put simply, the FRC’s prime responsibility is to record and monitor suspicious transaction and to ensure that all financial institutions oblige to legal requirements of suspicious transactions reporting.
We must strengthen the FRC’s capacity to report suspicious transactions and enhance its powers in supporting the ARA in tracing, seizing, and confiscating suspicious cash transactions.
And, in view of the growing sophistication of money laundering networks and the links they are forging with powerful politicians, banks will have to invest more in developing capacity not just in enforcing KYC but in customer profiling and in systems that can deliver real time data to fraud managers on a dashboard.
