•Weaknesses in the country's finance and real estate sectors have been exploited.
•Nairobi International Financial Centre Authority acting CEO Oscar Njuguna says regulations to govern the centre are being finalised and will be ready in the next two weeks.
Kenya could become a regional financial powerhouse and Fintech hub if it addresses illicit finance and money laundering challenges, a new report states.
This, as the government finalises its National Risk Assessment ahead of a Financial Action Task Force’s (FATF) mutual evaluation review.
Also in the pipeline is the Nairobi International Financial Centre targeted to be an entry point for finances into the country and the region, with a focus on investments.
How the government responds to illicit finance risks will play a key role in its ability to attract business and investment from overseas, the report titled 'Kenya Illicit Finance Risks and Assessment', by The Sentry notes.
This is an investigative and policy team that follows dirty money connected to African war criminals and transnational war profiteers.
The report details critical steps that Kenya can take to support financial transparency and integrity ahead of major reviews and international engagements to counter illicit finance and money laundering in its financial system and across the region.
Despite Kenya’s reasonably documented anti-money laundering and countering the financing of terrorism framework, gaps remain and there are legal, operational, political, and knowledge barriers to effective implementation, investigators at the entity note.
Weaknesses in Kenya’s finance and real estate sectors have been exploited by neighbouring countries such as South Sudan, where politically exposed persons linked to the conflict have infiltrated Kenyan banking, real estate, trade, defense, and corporate enterprises with their ill-gotten gains.
During a recent interview with the Star, Financial Reporting Centre (FRC) Director-General Saitoti Maika said that real estate remains vulnerable to illicit finance.
"Not only in Kenya but globally, real estate is an area that is targeted but we cannot be certain that this is what is happening in Kenya,” he said, noting there was a risk assessment was being conducted to gather more information.
Maika said lack of a strong regulator in the sector has left a lot of transactions unchecked despite efforts to sensitise industry players to do through background checks on investors.
The report further notes that Kenya faces severe money laundering risks with numerous illicit finance risks exposing its society to crime and deprive it of public services.
These include domestic corruption, terrorist financing, environmental crimes, illegal trafficking, tax evasion, and the misuse of digital finance such as mobile banking and cryptocurrency.
“If Kenya has the political will, it has the ability to respond to existing threats, but tech-enabled and cyber risks require additional training and technology resources for an effective response,” the report reads in part.
The country's anti-money laundering and countering the financing of terrorism framework also requires improvement, it adds.
Denisse Rudich, Senior Advisor at The Sentry and author of the report focuses on areas the Eastern and Southern Africa Anti-Money Laundering Group should consider in preparation for its upcoming onsite visit, including the Financial Action Task Force review.
"The mutual evaluation review presents a critical opportunity for Kenya to enhance its anti-money laundering and counter-terrorist financing laws and regulations,"said Rudich.
With the Vision 2030 and the launch of the Nairobi International Financial Centre, Kenya can now step up and become a leader in the fight against illicit finance, promoting transparency and integrity as it grows as a regional finance hub, Rudich adds.
Nairobi International Financial Centre Authority acting CEO Oscar Njuguna yesterday said regulations to govern the centre are being finalised and “will be ready in the next two weeks.”
Some of the areas identified that require enhancement include the risk-based approach, proliferation financing, sanctions adherence, financial secrecy, resourcing available for anti-money laundering and countering the financing of terrorism compliance, politically exposed persons, wire transfers and new technology.
"By introducing urgently needed reforms, Kenya can show the world that it isn’t open for business to those seeking to launder the proceeds of foreign corruption, including its neighbours in South Sudan,” said Justyna Gudzowska, director of illicit finance policy at The Sentry.
In his Mashujaa Day address, President Uhuru Kenyatta said gains made in the digitalisation of financial processes and transactions have made it possible for the country to better track and trace illicit flows of money.
“We remain committed to the Anti-Money Laundering and Combating Financing of Terrorism frameworks stipulated by the Proceeds of Crime and Anti-Money Laundering Act ,” he said.