How Kenya is Confronting Illicit Money, Fake Currency, And Money Laundering In Its Economy

By Steve Biko / Published August 25, 2023 | 9:02 am



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Kenya has been facing a significant challenge in recent years with the inflow of illicit funds, circulation of fake currency, and the pervasive practice of money laundering.

These issues pose severe threats to the country’s economy and reputation, requiring comprehensive actions to counteract the detrimental effects they can bring. In this article, we delve into why these issues are perilous to Kenya’s economic stability and global image, along with the measures that must be taken to confront this menace.

Illicit cash inflows, fake money, and money laundering divert resources from productive sectors of the economy, hindering overall economic growth. This depletes capital that could otherwise be invested in industries, infrastructure, and job creation.

The presence of fake currency and illicit funds erodes public trust in financial institutions and the currency itself. This can discourage legitimate investment and financial activities.

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Illicit money flows can distort financial markets, leading to asset bubbles and excessive risk-taking. This threatens financial stability and can trigger economic crises, as witnessed during the 2008 global financial meltdown. Countries with high instances of illicit money and money laundering deter foreign investors due to the associated risks. This can slow down foreign direct investment (FDI), which is crucial for job creation and technology transfer.

Persistent issues with illicit money and fake currency tarnish Kenya’s reputation globally, making it less attractive for trade, tourism, and international cooperation. To address these issues, Kenya has implemented several measures to combat money laundering and terrorist financing.

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The country has an Anti-Money Laundering Act (AMLA) that criminalizes money laundering activities. The act also established the Financial Reporting Centre (FRC) as a central agency for receiving, analyzing, and disseminating financial information relating to suspected proceeds of crime.

Kenya has also established a legal framework for asset recovery through the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA). The act provides for the confiscation of proceeds of crime and assets derived from criminal activity. The Asset Recovery Agency (ARA) is responsible for implementing asset recovery measures under POCAMLA.

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The Central Bank of Kenya (CBK) has also implemented Know Your Customer (KYC) guidelines for banks to identify their customers’ identities before opening accounts or conducting transactions. The CBK has also established a framework for reporting suspicious transactions by banks through the Suspicious Transaction Reports (STRs).

Kenya has also established a legal framework for combating terrorism financing through the Prevention of Terrorism Act (POTA). The act criminalizes terrorism financing activities and provides for penalties for those found guilty of such activities.

In essence, Kenya’s economy is facing significant challenges from illicit funds inflow, circulation of fake currency, and pervasive money laundering practices. These issues pose severe threats to the country’s economy and reputation. To address these issues, Kenya has implemented several measures such as AMLA, POCAMLA, KYC guidelines, STRs reporting framework, and POTA to combat money laundering and terrorist financing.

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