Revealed: Lucrative businesses where city crooks launder their money
Second-hand car dealers, real estate developers and law firms have emerged as new conduits for laundering dirty cash into the economy, the anti-money laundering czar and banks said on Thursday.
The Financial Reporting Centre (FRC) and Kenya Bankers Association (KBA) have called for a review of the law to require non-financial firms to start reporting suspicious dealings and transactions from Sh1 million.
The Proceeds of Crime and Anti-Money Laundering Act (Procamla) requires requires financial institutions to report any suspicious or unusual transaction to the FRC — the agency operationalised in April 2012 — to identify and combat money laundering and financing of terrorism.
Procamla, first enacted in 2009, has been amended three times (2013, 2015 and 2017) to address the changing dynamics.
LOOPHOLES SEALED
FRC and KBA officials, however, said shrewd traders are increasingly moving away from financial systems such as banks when laundering proceeds of crime and corruption after most loopholes were sealed through tighter rules.
“To a large extent, it’s not the financial institutions that are used to abet corruption (because) proceeds of corruption are not necessarily going into financial institutions,” FRC chief executive Saitoti Maika said during the two-day Multi-Sectoral National Conference on Corruption which ends Friday in Nairobi.
“We are looking at …areas of real estate and second-hand motor vehicles where people are able to trade in cash basis. The issue of being able to buy a second-hand vehicle in cash and that sector is not regulated, we are also addressing that.”
KBA, the bankers’ lobby, in June 2018 implemented tighter self-regulations to curb money laundering in the wake of the multibillion-shilling National Youth Service (NYS) scandal.
NYS TRANSACTIONS
Five banks have been found complicit in facilitating shady NYS transactions and fined a cumulative Sh393 million.
KBA chief executive Habil Olaka said fraudsters and corrupt individuals were getting smarter after self-regulating guidelines, which reinforced the ones in the law, reduced the probability of laundering dirty money through banking system.
“We should need to keep improving the law as new areas come up. Things like human trafficking … and even second-hand vehicles are new ways of laundering money,” Dr Olaka said.
Lawyers are targeted in property transactions, bank account management, company acquisitions and set up of new firms.