- Senior management of banks are to implement board-approved money laundering/terror financing policies.
- Bank staff are to prepare periodic reports on money laundering and terrorism finance for their senior management and boards of the bank and also communicate these to the CBK.
- Financial institutions will be required to appoint a money laundering reporting officer who will be the point of contact for CBK.
- Banks should assess and rank TF and ML instances and actions in terms of high, moderate, and low risk.
- They should identify countries and regions that are high risk for business; high-risk includes countries subject to sanctions from the UN and other credible organizations, countries that don’t have appropriate banking safeguards and countries known to sponsor terrorism.
- Banks are to assess their customers for money laundering and terror financing risks; suspicious customer activities include frequent and unexplained movements of money to other accounts, or other institutions, and to far locations. They should also look at politically exposed persons who bank with them including prominent public figures, senior politicians, judicial officers, corporate CEO’s who dealing with them, or their families, may bring a reputational risk to the bank.
- Banks are to assess their service delivery channels for money laundering risks. They are to pay attention to cash-intensive businesses, including supermarkets, convenience stores, restaurants, retail stores, liquor stores, wholesale distributors, car dealers.
The value of African art can grow tremendously over the next decade with investment and support from buyers both within Africa, and others who live beyond the continent, as well as from African art schools, governments, museums, galleries, art professionals and banks to stimulate and support more interest in African art.
These are some of the findings from the Art & Finance Report 2017 that was unveiled at Deloitte’s 10th Art and Finance conference at the Italian Stock Exchange in Milan this week and which estimated that the value of art owned by Africans collectors was $12.7 billion in 2016 and that it could grow to $20 billion by 2026. This still accounts for less than 1% of the global art market currently estimated at $1.6 trillion with an annual turnover of $50 billion.
Some key findings of the report which looked at the global art markets include:
- The art market should be self-regulated and there is great support for art to be part of wealth management offerings to customers at more private banks.
- Banks need more specialists to properly value and manage art markets.
- Art can be used as collateral, enabling art collectors and galleries to realize liquidity without having to make unfavorable sales to meet short-term cash-flow needs. See this on how to borrow against art.
- Art as an investment class poses risks that are no different from others that banks manage and have to guard against, including vices like price manipulation, insider trading, money laundering and terror financing.
- The top categories in the global art market are “post-war & contemporary art”, followed by “modern & impressionist art”, “Chinese & Asian art” and ” jewels & watches”.
Some excerpts from the report on the African art market include:
- International dealers and auction houses like Bonhams and Sotheby’s are seeing a gradual shift in the African contemporary art buyer base from mainly African art collectors to a more international and diverse group of art collectors.
- London experienced a 12.5% rise in African art auction sales between 2015 and 2016, with Bonhams controlling a 65% market share.
- Sotheby’s London joined the African art auction trend in 2017 with its first auction focused purely on African contemporary art. It achieved total sales of over $3.6 million and 79 of the 116 lots were sold.
- In 2017, record-breaking hammer prices recorded at auction for contemporary art were achieved by Nigerian artist Njideka Akunyili Crosby, whose work sold for less than $100,000 at auction in 2016. However, less than a year later, the artist’s piece “Drown” sold for a record-breaking US$1.1 million at a Sotheby’s auction and a few months after that, her 2012 painting “The Beautiful Ones” sold for US$3.1 million at a Christie’s London auction.
There is currently an inter-section of art, wealth, and technology with the possibility that bitcoin / block-chain can be used to assist banks and financiers with tools to help with transparency authentication, copyrights and ownership of art objects and there are already platforms such as Blockai, Ascribe.io, Chainmark, and smArtchain etc. in use.
The greatest demand for African art is currently from high net worth individuals in Nigeria and South Africa, which are the two largest economies in Africa. The report also notes that there is increasing demand from corporations such as the Nigeria Stock Exchange
Elsewhere In Kenya, Stanbic was working on investor management portfolio offerings that include wine and African art, while Nigeria has Access Bank in Nigeria. There are also other innovations coming up in African art and finance from leading banks and galleries in Kenya, South Africa and Europe.
There was this fantastic story on Tuko website about huge donations that were made to a Church on behalf of the President and the Deputy President.
They were each said to have given 34 million shillings in a video shows the Governor of Narok county presenting an envelope with the cash. He also gave 6.8 million of his own, and another 3.4 million from another governor.
The sum of 34 million is incredible. Indeed, it is almost the same amount as the equally implausible claim of 40 million from NYS that Josephine Kabura says she carried out of a bank hall on more than one occasion.
So what’s more likely?. I though it may have been a donation in Tanzania as Narok county borders Tanzania. But a different story by Citizen TV of the same event notes that the Kenyan contingent donated a sum of 82.6 million shillings in support of the Ugandan Church in Sebei, Kapchorwa District.
If the donations were in Uganda shillings (UGX), not Kenya shillings (KES) then that makes more sense, and tallies with the video clip that shows the size of the cash bundles, and is more realistic in terms of the usual donations that leaders are reported to make. 34 million Uganda shillings is equal to about 1 million Kenya shillings, UGX 6.8 million equals KES 200,000, and UGX 3.4 million is equal to about KES 100,000. There’s no clear mention of the currency (whether Kenya shillings or Uganda shillings) in the video and it’s likely that the Governor translated the equivalent in Uganda shillings for the congregation while presenting the Kenya shillings donation to the Church.
$1 = KES 101, $1= UGX 3,500, 1 KES = UGX 34.
Last week Josephine Kabura got to testify about her banking transactions before a televised Parliamentary Accounts Committee (PAC) hearing of an ongoing investigation of the National Youth Service (NYS), and she made some rather startling claims about having tens of millions of shillings from the NYS deposited into her company accounts which she instantly withdrew in cash to pay her suppliers. But in the absence of closed-circuit television (CCTV) footage, which banks typically don’t keep for too long (the security companies erase them over if there are no security incidents), the documentation and bank rules covering cash handling risks, fraud, and money-laundering simply don’t support these claims.
While MP’s asked her about the physical improbability and difficulty of her carrying that money out of the bank (sums of Kshs 40 million in paper bags) to go pay suppliers at a quarry, the possibility of this is unlikely. A vault at an obscure bank branch is unlikely to have more than Kshs 10 million shillings sitting around. Banks allocate money to branches based on their usage (average daily deposits and withdrawals) and it is unlikely that such amounts of money in paper currency would ever sit idly around as there are insurance and cash handling costs and risks.
Within the bank, risks managers and systems would have noticed patterns in her company accounts, previously empty, and now suddenly receiving millions of shillings per day, that she immediately withdrew in cash. Also when someone tries to send, transfer, or withdraw over $10,000 i.e. ~Kshs 1 million, it triggers an extra form at the bank that must be filled out and later sent to the Central Bank explaining the purpose of the transaction. Usually, the head office of a bank will ask for extra documentation, such as invoices or contracts to support the processing of such a transaction. A similar case with suspicious payments received from the Youth Enterprise Development Fund at Chase Bank showed how such account activity triggered alarm bells within a bank and subsequently with the regulators.
When Kshs 100 million is wired to your bank, it does not mean that Kshs 100 million magically appears at your bank branch to be withdrawn as cash. At any branch, the tellers and cash managers have limits of cash they can handle or approve at any given time. They have to get approval, or witnesses to do larger transactions and those are in exceptional requests. Bank systems are set up not to allow suspicious transactions that exceed pre-set limits and daily thresholds.
For more money to be allocated to a bank branch, a top decision would have to be made by bank directors to allocate and transport more money to serve the enhanced needs of customers at a particular branch. But it is more probable that such a customer would be “upgraded” and transferred to another branch for premium customers with better security and with higher cash limits. Such a customer would also be assigned a relationship manager to help them manage their liquidity (in this case – Kshs 1.6 billion in 14 months) even better and cross-sell them other bank products.
It is more probably, as MP Abdikadir Aden, postulated at the PAC hearing, that the cash was never really there. When large sums were wired in, withdrawal transactions were initiated to show that cash was being withdrawn, but that the reality was that, simultaneously, other transfers were done and cash deposit slips were filled in to reflect cash deposits for the exact same amounts, into other accounts, a few minutes later.
Finally, earlier this year, the Central Bank issued new rules that further restricted deposit or withdrawal of cash. Could this have been due to the same Kabura activities that happened over a year before?
This is the theme of the third Africa for Results Forum (AfriK4R) forum that’s taking place in Nairobi from July 13 to 15, and organized by the African Capacity Building Foundation (ACBF) and the African Development Bank (AfDB).
The first one was held in 2013 in Harare, and the next in 2015 in Abidjan. One of the main concerns has been that, with the diminishing official development assistance (ODA) to Africa, estimated to be 27% in 2014, and down from 38% in 2004., the budget needs of African governments need to be matched by a growth in local resources like taxes, exports and natural resources.
Kenya’s Devolution CS Mwangi Kiunjuri cited some of the resources available to Africa including $520 billion annually from domestic taxes that Africa generates, $168 billion from minerals & fuels, $400 billion that Africa holds in international reserves, rise in Stock market Capitalization from $200 billion in 1996 to $1.2 trillion in 2007 and $160 billion in sovereign wealth funds (10 African countries have established these)
Challenges of African government face to mobilize domestic resources include: a very narrow tax base and a huge informal sector; high levels of capital flight; tax evasion & avoidance; proliferation of tax exemptions; lack of legitimacy of tax administrations; relatively low penetration of the formal banking sector; and lack of human, technical, legal, regulatory, and financial capacity to deal with illicit financial flows – Thomas Munthali, Director, ACBF.
Munthali, also cited good examples of domestic resource mobilization including the Central Bank of West African States (BCEAO) reform on e-money; the Uganda border-post anti-smuggling trade measures; the Zambian direct deposit of fees into one government account; Zimbabwe’s tapping on the informal sector by introduction of presumptive tax; and Malawi’s use of Electronic Fiscal Devices in VAT collection.