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US puts Kenya on list of cash laundering hotspots

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US puts Kenya on list of cash laundering hotspots

The United States government has put Kenya on a list of global hotspots for money laundering
The United States government has put Kenya on a list of global hotspots for money laundering, citing insufficient controls on the circulation of dirty cash and the lack of laws against terrorism financing. FILE PHOTO | NMG 

The United States government has put Kenya on a list of global hotspots for money laundering, citing insufficient controls on the circulation of dirty cash and the lack of laws against terrorism financing.

A report published on Friday by the United States Department of State Bureau for International Narcotics and Law Enforcement Affairs said money laundering in Kenya occurs in the formal and informal sectors, fuelled by domestic and foreign criminal operations.

“Kenya remains vulnerable to money laundering and financial fraud,” says the report.

“It is the financial hub of East Africa, its banking and financial sectors are growing in sophistication, and it is at the forefront of mobile banking.”

Nations that are classified as havens for money laundering by the US attract scrutiny from global financial players and banks while investors are likely to carry out additional checks on payments involving entities from listed jurisdictions.

The report said “criminal activities include transnational organised crime, cybercrime, corruption, smuggling, trade invoice manipulation, illicit trade in drugs and counterfeit goods, trade in illegal timber and charcoal, and wildlife trafficking,” said the report.

Kenya recently formed a high-powered anti-money laundering task force to establish the extent of money laundering in the most susceptible sectors of the economy, setting the stage for a crackdown on the suspects.

The team gazetted by Treasury Secretary Henry Rotich brings together 30 State agencies from the security apparatus, the Judiciary, as well as banks, Saccos, real estate and gaming regulators.

“Financial institutions engage in currency transactions connected to international narcotics trafficking involving significant amounts of US currency derived from illegal sales in Kenya, other East Africa countries, the United States, and elsewhere,” added the 2019 International Narcotics Control Strategy Report.

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The report prepared annually by the US Department of State has been presented to the US Congress.

It described Kenya’s vibrant financial system as a magnet for money laundering.

“Banks, wire services, and mobile payment and banking systems are increasingly available in Kenya. Nevertheless, unregulated networks of hawaladars and other unlicensed remittance systems facilitate cash-based, unreported transfers that the government cannot track,” it said.

The report says Kenya’s proximity to Somalia makes it an attractive location for laundering piracy-related proceeds.

Under the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA) and other banking regulations, Kenyan financial institutions and entities are mandated to report to the Financial Reporting Centre (FRC).

But the report said that while Kenyan banks are subject to Know your customer (KYC) and STR (Suspicious Transaction Reports) rules and have enhanced due diligence procedures in place for PEPs (politically exposed persons) more needs to be done.

“While Kenya has made strides in implementing an AML framework, challenges remain to achieving comprehensive, effective implementation of AML laws and regulations,” it said.

“Kenya should fully satisfy its commitments on good governance, anti-corruption efforts, and improvements to its AML regime,” it added.

It proposes that an automated system would improve the FRC’s efficiency and ability to analyse suspicious transactions.

“Although the FRC receives STRs from some MVTS (Money Or Value Transfer Services providers), this sector is more challenging to supervise for AML compliance,” it says.

“To demand bank records or seize an account, police must obtain a court order by presenting evidence linking deposits to a criminal violation. Confidentiality of this process is not well maintained, allowing account holders to be tipped off and to move assets.”

It says the government, especially the police, should allocate adequate resources to build sufficient institutional capacity and investigative skills to conduct complex financial investigations independently.

“The tracking and investigation of suspicious transactions in mobile payment and banking systems remains difficult,” it says.

In February the Central Bank Governor Patrick Njoroge pushed back against a bid by MPs seeking to soften anti-money laundering laws, warning that the proposed amendments would frustrate the war on corruption and cut off Kenya’s banking sector from the global financial system.

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World Bank pushes G-20 to extend debt relief to 2021

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World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

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People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

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Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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Scope Markets Kenya customers to have instant access to global financial markets

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NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options. 

This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.

The Scope Markets app offers clients over 500 investment opportunities across global financial markets.

The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.

The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).

The platform also offers an enhanced client interface including catering for those who trade at night.

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The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour;  Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).

The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.

Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”

He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.

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