Criminals have turned to use of proxies in entity registration and management. FILE PHOTO | NMG
As authorities spend sleepless nights in efforts to effectively
monitor financial transactions, criminal enterprises have equally
upgraded to beat the improved surveillance.
Over the
years, several regulations have been passed and regulatory bodies are
also working. The Public Officer Ethics Act (2003) introduced
declaration of wealth to facilitate lifestyle audits and point out
scenarios of sudden accumulation of wealth.
Others
were Proceeds of Crimes and Money Laundering Act, 2009. The law
introduced regulatory bodies of Financial Crime Centre and Asset
Recovery Unit which have the mandate of monitoring as well as leading
the recovery of assets acquired with criminal proceeds.
In 2016, the country enacted the Anti-Bribery law that extends to the private sector.
All these laws have forced criminals to go back to the drawing
board for more complex networks to transact, hide and clean their loot.
One,
financial sector criminals have turned to use of proxies in entity
registration and management. Just like use of mules in transportation of
narcotics, proxies are used to register and operate accounts on behalf
of criminals.
Most of these proxies have no relations with their masters, making it difficult to crack their code.
The
recent anti-corruption agency report exposed the rot at the counties.
But it would be difficult to trace officers involved in the looting
because aware that they would be trailed, they leave no visible marks.
Overtime,
most have drifted to operating charity organisations as smoke screens
for their work. Almost to a man, they have foundations whose projects
are undefined and process of funding is unclear.
Secondly,
the international trade platforms have provided a proper chance due to
the complex crossborder nature. Daily, millions are wired out for
settlement of imports. However, the authorities have no monitoring
systems to ensure that an equivalent value of goods is shipped in.
Also,
some of these funds are wired back and grouped as diaspora remittances.
For the last decade, the remittances have grown exponentially from an
average of Sh2.5 billion monthly in 2004 to the current average of Sh18
billion.
This translates to more than Sh200 billion a
year. It would be prudent to develop a mechanism of marching outgoing
wire payments with incoming imports. Its also imperative to analyse the
remittances to rule out any kiting.
For the last
decade, the real estate has overtaken agriculture and tourism sectors.
However, the sector is largely unregulated, making it an easy target for
financial criminals.
By registering and operating
several companies and unregulated saccos, they are able to create a
complex web. The regulation only focuses on deposit-taking saccos and
microfinance while the rest are under the department of Co-operatives
with limited capacity to monitor their operations.
Internet-based
gambling has created a new avenue for financial criminals to hide their
loot since they operate cross-border. It is, therefore, high time we
intensified our monitoring.
Thiongo Irungu is senior compliance officer- Anti-Money Laundering and Regulatory Compliance.
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