Why is the construction sector a preferred choice for money launderers in Kenya?
According to BRS, there were 690,222 private companies registered in Kenya by December 2022, out of which 395 were reported in relation to terrorism financing incidents and a total of 10,733 reported for money laundering.
More than half (56.5 percent) of these firms were involved in the construction sector, signaling the rapidly growing sector as a preferred conduit for money launderers.
This was followed by real estate (8.07 percent), manufacturing (7.17 percent), money transfer agents (5.83 percent), consultancy (4.48 percent), textiles (4.04 percent) and retailers (3.14 percent).
“The responses indicated that private limited companies (98.09 percent) were the highest legal structures associated with money laundering. Further, out of the 98.09 percent cases involving private limited companies 43.51 percent of the cases involved abuse by directors of the company, employees were also involved to a great extent,” said the report.
This has placed Kenya under high surveillance in what is known as the ‘grey list’ alongside 21 other countries by the global anti-money laundering watchdog Financial Action Task Force (FATF).
According to the FATF, being grey-listed or black-listed means the country is not effectively implementing measures to combat money laundering and terrorist financing according to its standards, including the management of an efficient, up-to-date, and accurate register of beneficial ownership.
This could lead to a decline in confidence by global financiers in Kenya’s financial system, which could lead to capital flight as investors, both domestic and international, may withdraw their funds due to concerns about the integrity of the financial system, say analysts.
“Based on the findings of this report it is recommended that the country reviews the laws governing the trust regime in Kenya and put in place measures to mitigate or deter their use for money laundering and terrorism financing purposes,” states the report.
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