A forex bureau in Nairobi. FILE PHOTO | NMG
Summary
I can’t wait to see how the
prosecutions and trials of top officials of Kenya Bureau of Standards
proceed and how the claims and allegations by investigators will fare
when subjected to tough interrogation before magistrates and judges.
As
the new crackdown on corruption progresses it is becoming increasingly
clear that what this country needs is an elite squad of corruption
investigators - economists. procurement specialists and auditors with
the skills needed to investigate complex cases such as
corruptly-procured roads and buildings, money laundering, or corruption
in privatisation transactions.
It seems to me that we
will also need professionals with competence to investigate conflict of
interest, campaign finance, illicit business cartels, and bribery within
the Judiciary and Parliament.
In many African
countries where anti-corruption agencies are driven by police
investigators, arrests have tended to concentrate on bribe-taking
traffic policemen, clerks who issue permits and licences, customs
officials, and immigration officials.
The trends we are witnessing in the ongoing investigations
suggest that we need an elite squad with a staff complement top-heavy
with auditors, accountants, land valuers, quantity surveyors, civil
engineers, lawyers, architects, public education professionals and
journalists.
Which leads me to the issue of corruption
money laundering. This week, the Kenya Bankers Association came up with
new guidelines on large cash transactions.
Bank customers will now be required to provide evidence and proof of source of funds when depositing large amounts.
In
the world of mobile money and electronic money transfers, I don’t see
why people should be allowed to withdraw and carry loads of cash. It
makes sense to put limits on large cash transactions because this is how
you can track and trace movement of proceeds of corruption.
Still,
we have agreed that our banks have not done a very good job in terms of
supporting enforcement of anti-money laundering laws. That is why a
hairdresser known as Josephine Kabura of the National Youth Service
(NYS) infamy was able to receive and bank billions without being
flagged.
The story of the infamous housemaid who
illegally imported two million sticks of cigarettes is still fresh in
our minds. If our banks were strict, she would not have been able to
open a letter of credit.
Currently, the law requires
commercial banks to report all transactions above Sh1 million to the
Financial Reporting Centre (FRC) on a daily basis.
But
the problem is that though the FRC receives and processes information on
suspicious transactions it does not have a database robust enough to
process the information and flag the suspicious ones on a real time
basis and at the same time report it to authorities for action.
Underfunded
and understaffed, it remains limited in terms of capacity and
capability. At times, I feel that part of the problem has to do with the
fact that we were forced to adopt the anti-money laundering law by the
international financial community when were not ready to do so.
Indeed,
it was the Financial Action Task Force (FATF) that forced us to pass an
anti-money laundering law in 2012- after threatening to put us on a
grey list if we failed to do so by the end of the year.
We
must accept that the structure of our banking system lends itself to
shady dealings and dodgy transactions. We have too many small banks,
most of them owner-occupier entities effectively run by individual
owners under no obligation to observe ‘know your customer’ guidelines.
The
world over, experience has shown that dodgy banking transactions become
the norm in cities with too many small banks, especially in territories
with large immigrant and expatriate communities. Why should towns like
Kisumu, Eldoret, or Nakuru have more than 10 banks? Why should Eastleigh
estate in Nairobi have too many banks?
Yet another
tell-tale sign of the financial system’s vulnerability to suspicious
transactions is the mushrooming forex bureaus. Today, Nairobi’s central
business district is littered with such bureaus competing for survival
in a very small market. From little businesses handling small
transactions, forex bureaus in Nairobi have grown into large businesses
capable of handling large volumes of cash transactions. Clearly, the
banking sector is ripe for major restructuring.
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