By Leonard Wanyama
Ongoing revelations of corruption in state institutions, are drawing massive citizen indignation as details on the scale and magnitude in new incidences 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 fertilizer issues at the National Cereals and Produce Board (NCPB), payment irregularities at the Kenya Power and Lighting Company (KPLC), controversy at the Kenya Pipeline Company (KPC) among others, are enraging Kenyans.
This is, however, resulting in growing resentment towards financial institutions which are now being viewed as major accomplices to mega- corruption on account of being conduits for stolen public funds from state institutions.
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.
However, it seems that the banking sector’s hubristic concern for bottom- lines alone, has blinded it to how mega corruption is detrimental to the crucial implementation of trade and investment activities needed to spur widespread growth across Kenya.
Corruption, and the illicit financial flows that accompany it, cause massive losses to the country owing to how they distort revenue collection, allocation and expenditure processes thereby perpetuating the vicious cycle of poverty within the country.
This phenomenon not only jeopardises development programmes, but it also damns the country by entrenching structural and systemic inequality plus undermining socio-economic institutions. It also prevents opportunities for international cooperation due to a loss in foreign investor confidence.
Kenya’s economy is transitioning from its informal cash based systems- which are confounded by the country’s weak regulatory structures and poor supervisory frameworks- in order to restrict the proceeds from crime being infused into its financial system.
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 (CBK), under the Proceeds of Crime and Anti-Money Laundering Act, 2009 (POCAMLA 2009).
However, further 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 to comply with reporting obligations, thereby abetting these financial offences.
Banks should therefore be at the forefront of implementing these national disclosure processes and mechanisms in order to help curb white- collar crime by encouraging transparency that lifts the veil of secrecy that has enabled, for a long time, state thievery.
Following the exposés, the Kenya Private Sector Alliance (KEPSA) was quick to issue a statement distancing itself from the named individuals and their business entities, clarifying that they were not members of KEPSA in any way, shape or form.
However it 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 and would therefore be available to support efforts in identifying them.
As Phase II of these investigations gets underway, it is important to not only identify the business entities that benefited from these fraudulent payments but also name the commercial banks that were complicit.
KEPSA should therefore take advantage of POCAMLA 2017 amendments to heavily penalise any of its members who get involved in graft.
The Kenya Bankers Association (KBA) should also complement this by tightening their internal and external measures in order to curb money- laundering especially in light of the fact that under the new law, individuals and corporates found guilty can be fined up to KES 5 million and KES 25 million respectively.
The author is coordinator of the East Africa Tax and Governance Network Follow @EATGN Email: lwanyama@taxjusticeafrica.net
