There have been rumours that the Kenyan property market currently on the upward trajectory is partly being fuelled by funds from piracy along the Somali-Indian Ocean line.

Recently, Prime Minister Raila Odinga made a strong point in Parliament that there is a possibility the growth might be due to the proceeds from the ransoms.

This comes after United Arab Emirates denied reports in a UK-based newspaper that the emirate has been laundering money belonging to Somali pirates.

The Independent had run a story claiming that huge amounts of money taken in ransom from vessels hijacked off the Horn of Africa were being laundered in Dubai and other Gulf countries.

It is estimated around $80 million has been paid out in ransom to pirates in the past year.

If this is true, then the question of morality arises.

Can Kenya boast of a booming housing and property market that is buoyed by ransoms paid by grieving families and distressed companies?

This is dirty money and accepting it in your financial system is as immoral as abetting the vice.

This is the reason all over the world the anti-money laundering campaigns have gained more prominence.

Anti-money laundering (AML) is a term mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent or report money laundering activities.

Some people have also likened it to "whitening the black money".

Today, most financial institutions and many non-financial institutions are required to identify and report transactions of a suspicious nature to the financial intelligence unit in the respective country.

To facilitate this exercise, different financial institutions use the services of companies such as C6 to gather information about high risk individuals and organisations.

Different countries have diverse yardsticks in their efforts to step up the fight against the vice.

For example, in the US, a deposit of $10,000 or more requires a CTR (Currency Transaction Report), in Europe it is EUR 15,000.

According to the 2009 US Department of State report, Kenya does not have an effective AML regime and has not criminalised terrorist financing.

Kenya has been building capacity against money laundering and terrorism financing.

The most conspicuous attempt at it is probably the establishment of the National Task Force on Anti-Money Laundering and Combating Financing of Terrorism in 2003.

The anti-money laundering proposed legislation titled "Proceeds of Crime and Anti-Money Laundering Bill," which was passed by Parliament on December 16, 2008 was not signed into law by the President.

The Bill has been re-introduced in parliament.

Although FATF recommendations are designed to provide flexibility, most developing countries, Kenya included, have not domesticated and tailored their AML/FT policies.

Indiscriminate implementation of these rules might make matters worse.

Standards that prevent people from using formal channels drive people to informal service providers, creating larger unmonitored sectors of the economy and, ultimately, undermining the very political and economic stability these controls are meant to support.

The implementation of these rules must be in such a way that they don't push people from the formal financial channels or encourage financial exclusion.

Lack of identification documents can easily lead to financial exclusion.

For instance, in a recent survey by CGAP, an independent policy and research centre advancing financial access, indicated that in South Africa early due diligence regulations requiring identity and address verification created a significant barrier to access in a country where 1.75 million people do not possess any identity documents.

And in Kenya, as much as 95 per cent of the population will not be able to prove their residential address as required in a proposed AML Bill.

In a nutshell, without comprehensive and workable AML/TF policies and legislation, the dirty money will continue doing the rounds.

That's why the Anti-Money Laundering Bill must be passed without delay.

Kihuro is a risk management practitioner at Panafrican housing financial institution, Shelter Afrique, Nairobi.