Is dirty money fuelling Kenya’s real estate boom?

Global financial regulators have in the past flagged Kenya as a high-risk place for money laundering
Global financial regulators have in the past flagged Kenya as a high-risk place for money laundering.
Over the past decade or so speculation has been rife that tonnes of illicit cash has been the force behind the rapid growth of the local real estate sector.

There have been concerns that billions of shillings corruptly gained by looting public funds, drug dealing and piracy have been laundered by criminals buying prime property in Kenya’s major cities – thereby fuelling the rapid increase in property prices.

But the Kenya Bankers Association, which conducts a quarterly index of property prices in the Kenyan capital Nairobi, has come out to dismiss those claims saying Kenya has stringent regulations that would single out money laundering.

“Banks do their due diligence in reporting suspicious transactions to the Financial Reporting Centre. Banks have also sanctioned any of their employees found culpable in abetting financial crimes,” says KBA chief executive Habil Olaka.

KBA negates recent findings by Global Financial Integrity (GFI), a Washington-based financial watchdog, which showed that the amount of dirty money entering Kenya from faulty trade invoicing, crime, corruption and shady business activities had increased more than five-fold in a decade to equal nearly 10 percent of Kenya’s economy.

The report further noted that global financial regulators were flagging Kenya as a high-risk place for money laundering and terrorist finance – a development that undermines Nairobi’s ambition to become a major international financial hub by 2025.

Ironically, the local bankers’ lobby has spoken at a time when the Kenya Revenue Authority (KRA) is conducting a string of investigations linking several banks to graft and tax evasion syndicates.

Nearly 70 per cent of local commercial banks have also been cited by the National Assembly Public Accounts Committee (PAC) as having facilitated the movement of the Sh1.6 billion NYS scandal cash – part of which was used to acquire prime property in Nairobi.

The turn of events has further fuelled speculations that corrupt officials were increasingly buying property to hide their loot, especially considering that a large portion of the Sh180 billion National Youth Fund money that was recently misappropriated was used to acquire prime property in Nairobi.