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Kenya ranked among world’s major money laundering, fraud hotbeds

A report tabled before the US Congress has exposed Kenya’s vulnerability to money laundering, financial fraud and terrorism financing.

The vices are perpetuated through the growing use of mobile money transfer platforms, the hawala system of banking and Trade Based Money Laundering.

The document is part of the annual International Narcotics Control Strategy report tabled before the US Congress to monitor the most affected countries, and gaps and measures put in place to curb illicit financial transactions that further aid criminal activities.

Kenya ranked among major money laundering jurisdictions across the globe, with diaspora remittances to the country totalling to 1.78B USD (Sh178 billion) between January and August 2020 —  some of which is suspected to have been proceeds of narcotics trade.

Financial crimes

Other African countries in the same category include Nigeria, Ghana, Liberia, Morocco, Mozambique, Tanzania, Algeria and Benin.

Other countries on the list include Cyprus, Cuba, Italy, Mexico, Turkey, United Arab Emirates, Vietnam, India, Cayman Islands, United States, the UK, and Colombia.

The report published by the US State Department notes that despite the Covid-19’s effect on the status of many economies in the world, the flow of illicit money continued.

“Criminals not only continued to perpetrate traditional financial crimes, but devised new ways to exploit the pandemic through counterfeiting essential goods and telephone and email scams promoting health or medical products,” the report shows.

This was mainly facilitated by corruption in many parts of the world leading to weak political will, ineffective institutions and inefficient anti-money laundering infrastructure.

Illicit financial flaws

By being East Africa’s financial hub and the pioneer of mobile banking in the region, Kenya remains vulnerable to money laundering and terror financing across its formal and informal channels through cybercrime, corruption, wildlife trafficking and smuggling of illicit drugs, counterfeits, illegal timber and charcoal trade.

Kenya’s geographical location as a transit point for the region and its proximity to Somalia further makes it attractive for laundering of piracy-related proceeds and the unregulated miraa and charcoal trade.

Kenya’s efforts to curb illicit financial flaws are supported by the requirement by the Central Bank that all financial transactions above one million be flagged.

“Despite the progress, Kenya needs to strengthen implementation of good governance and anti-corruption measures and improve its Anti-Money Laundering and anti-terror financing regime,” warns the report.