7 June 2018

Kenya: Our Financial Institutions Must Take Strong Stand Against Graft

opinion

Recent revelations of corruption in State institutions has drawn massive citizen indignation as details on the scale and magnitude in new incidents of public theft continue to emerge.

News of the second scandal at the National Youth Service (NYS), coupled with other reports such as the nefarious maize and fertiliser issues at the National Cereals and Produce Board (NCPB), payment irregularities at Kenya Power and controversial tenders at Kenya Pipeline Company, among others, are enraging Kenyans.

This has resulted in growing resentment towards financial institutions, which are being viewed as major accomplices to mega corruption on account of being conduits for stolen public funds.

Banks are being particularly singled out for facilitating this vice despite being able to prevent or even stop illegal monetary dealings based on knowing the owners of accounts in their facilities and the ability to detect suspicious transactions by use of customer identification or profile data in their custody.

MEGA CORRUPTION

However, it seems that the banking sector's hubristic fixation with the bottom line has blinded it to how mega corruption is detrimental to the crucial implementation of trade and investment needed to spur growth countrywide.

Corruption, and the illicit financial flows that accompany it, cause massive losses to the country as they distort revenue collection, allocation and expenditure processes, thereby perpetuating the vicious cycle of poverty in the country.

As a means of institutionalising transparency and accountability within the system, the government established the Financial Reporting Centre (FRC), a financial intelligence unit within the Central Bank of Kenya, under the Proceeds of Crime and Anti-Money Laundering Act 2009.

Amendments to the law in 2017 heightened financial surveillance and enabled the prosecution of individuals and organisations facilitating corruption, money laundering and illicit financial flows, especially bank officials who fail in their reporting obligations, thereby abetting financial offences.

WHITE COLLAR CRIME

Banks should, therefore, be at the forefront of implementing these national disclosure processes and mechanisms to help to curb white-collar crime by encouraging transparency that lifts the veil of secrecy that enables thievery.

The Kenya Private Sector Alliance (Kepsa) was quick to distance itself from the named individuals and business entities, clarifying that they were not its members. It, however, also noted a high possibility that some of its members, within the banking sector, were likely to have been involved in siphoning funds stolen from state coffers.

Kepsa should heavily penalise any member involved in graft.

The Kenya Bankers Association (KBA) should also tighten its measures to curb money laundering, especially in light of the fact that, under the new law, culpable individuals and corporate bodies can be fined up to Sh5 million and Sh25 million, respectively.

Leonard Wanyama, coordinator of the East Africa Tax and Governance Network (EATGN). lwanyama@taxjusticeafrica.net

Kenya

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