Financial Crime World

Kenya’s Financial Sector Exposed to Corruption and Economic Crimes

Kenya’s financial sector is at high risk of corruption and economic crimes, according to a recent report by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). The report highlights various forms of corruption and economic crimes that are prevalent in Kenya’s financial sector, including:

  • Bribery
  • Soliciting and accepting bribes
  • Unexplained wealth
  • Embezzlement of public funds
  • Cybercrime
  • Tax-related offences
  • Money laundering
  • Counterfeiting and piracy of products

Corruption and Economic Crimes in Kenya’s Financial Sector

The report found that corruption and economic crimes are widespread in Kenya’s financial sector, with bribery and soliciting/accepting bribes being rated as high risk. The report also emphasized the need for strengthened anti-money laundering (AML) and combating the financing of terrorism (CFT) measures to prevent the misuse of Kenya’s financial system.

Money Laundering Investigations in Kenya

The assessment revealed that the number of money laundering investigations in Kenya is still low, despite a significant number of allegations having been reported. Additionally, most investigations and prosecutions are being conducted without considering parallel financial investigations alongside predicate offences.

Action Plan to Address Money Laundering Risks

To address these issues, a high-level Action Plan was developed and implemented to update the National Risk Assessment (NRA) of Money Laundering. The NRA was informed by the 2021 ML/TF National Risk Assessment of Kenya and the subsequent findings of the Mutual Evaluation Report (MER) of Kenya.

The updated NRA assessed various sectors, including:

  • Banking: rated as medium-high risk
  • Securities: rated as high risk, particularly in regards to non-dealing online foreign exchange brokers
  • Insurance: no significant risks identified
  • Non-profit organizations: no significant risks identified

Enhanced Monitoring of Tax Crimes

The report highlighted the need for enhanced monitoring of tax crimes, which are assessed as medium-high risk. The report noted that VAT carrousel fraud/missing trader schemes pose the highest threat to the tax system, followed by use of power of attorney/nominees/directorships to hide the ultimate beneficial owner of a legal structure.

Call to Action

The Kenyan government has been urged to take immediate action to address these issues and strengthen its AML/CFT measures. The report emphasizes the need for Kenya’s financial sector to be protected from corruption and economic crimes, and for strengthened monitoring and regulation to prevent the misuse of Kenya’s financial system.