The report which was published on Friday by the United States Department of State Bureau for International Narcotics and Law Enforcement Affairs says money laundering in Kenya is rampant and occurs in the formal and informal sectors.
As a result, the country has put Kenya on the list of global hotspots for money laundering, citing insufficient controls on the circulation of dirty cash and the lack of laws against terrorism financing.
“Kenya remains vulnerable to money laundering and financial fraud,” says the report.
Money laundering is said to be fuelled by domestic and foreign criminal operations. Kenya’s vibrant financial system is a magnet for money laundering.
“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.”
“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.
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 domestic and foreign criminal operations are said to engage in “criminal activities including 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,” according to the report.
Kenya’s proximity to Somalia also makes it an attractive location for laundering piracy-related proceeds, the report stated.
The report prepared annually by the US Department of State has been presented to the US Congress.
The report noted 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.
Kenya now joins the likes of Somalia, Nigeria, Zimbabwe, Mexico, Afghanistan, Belize and Panama, etc. as some of the countries and jurisdictions listed in the “Primary Jurisdictions of Concern” which calls for more attention.
