Nairobi — As the National Assembly in Kenya is moving towards adding a new excise tax on gambling, there is growing concerns over suspicious activities involving lucrative jackpots that authorities have flagged as potential money laundering activities.
It is being reported that the Interior CS, Fred Matiang'i, has expressed deep concerns that the owners of betting companies operating within the borders may be using their operation as a means to launder money through large jackpot winnings.
Brought to the attention of the proper authorities
Kenyan law makes it a requirement for gambling operators to report any type of suspicious activity with the Financial Reporting Center (FRC). It is the responsibility of the FRC to monitor and ensure that no illegal betting or other activity is involved within the industry.
However, Matiang'i has significant concerns that proceeds from these gambling operations may be used to fund criminal activity. The report explained that the cabinet secretary believes that winnings in these lotteries and other betting activities are then funneled outside of the country, possibly to organizations involved in criminal activity.
New laws surrounding gambling activities
This report comes at a time when the National Assembly has been making changes to gambling laws within the country. A February law was meant to "control excessive wagering" by restricting gambling activities at five-star hotels that operate casinos. At the time, Nairobi, the capital of Kenya, instituted the Gaming Amendment Bill, which issued licenses only to those hotel-casinos that were operating within the regulations.
In April, the National Assembly added an amendment to the 2015 Excise Duty Act. This provision, included as part of the financial bill, amended the excise tax rate on a number of products and services, including related to gaming, betting, lotteries, and other forms of prize competitions. This tax increased from 7.5% to 20.0%.
According to Michael Bauer, Casino Games and Spors Data Analyts at AfricaCasinoHub , this was a significant increase in the amount of excise tax, drawing some concerns from those within the industry. In 2019, the National Assembly had raised the excise tax from 7.5% to 10.0%. This move led to Sportpesa opting to withdraw their operations in Kenya, canceling their sponsorships of local football clubs as well as decreasing the number of workers the company employed.
That increase in tax lasted for just one year before the Parliamentary Finance Committee scraped the increase in the excise tax, decreasing concerns that overall gambling operations within the country could be significantly affected. Once the tax was decreased, Sportspea returned their operations to Kenya, but now the increase to 20% has led them to officially shut down operations altogether. This has many concerned that the loss of one operator is just the tip of the iceberg for other Betting Sites in Kenya.
Even greater concerns
This all comes at a time when lotteries and payouts are reaching significant levels, causing the Central Bank of Kenya (CBK) to announce that they will be more closely monitoring these larger transactions. According to the CBK, punters are likely to set aside large chunks of money inside betting wallets, while only actually providing a small fraction of the stake. This has led the bank to decide that they will monitor all suspicious bets, regardless of the size, regularity, or volume of the bets.
The current law does not obligate operators to report suspicious activities. This makes it even more difficult for the FRC to monitor and detect these types of suspicious or illicit activities. However, the regulatory agency now reports that they believe that as much as KES3.3 billion ($26 million) has been sent to offshore accounts since 2020.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
At one point, the FRC had suspended Sportspea over concerns of suspicious activity. The operator appealed to the Kenyan High Court, which removed the suspension, restating Sportspea's operations. Now they are out of the country altogether, as the new excise tax has them believing that there is no future in providing betting operations within Kenya.
The excise tax and the suspicious activity has cast a large spotlight on the betting industry within the country. There were already significant concerns about gambling among the youth, especially those aged 17-35, and now these issues could lead to additional legislation or regulation to try to prevent illicit activity.
