- 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.
Last week, Kenya’s opposition movement, the National Super Alliance (NASA), who boycotted the repeat presidential election held on October 26, announced an “economic liberation programme” and called on their followers to boycott the products of three companies Bidco, Brookside, and Safaricom.
— NASA Coalition (@CoalitionNASAKe) November 3, 2017
What’s the link?
Brookside Dairies is associated with the family of President Uhuru Kenyatta. The company was started in 1993 and Brookside has grown to control about 44% of the processed milk market in the country, ahead of New KCC and Githunguri Dairies.
Brookside has acquired several dairy companies and still sells milk under their original brands including Tuzo, Molo Milk, Ilara and Delamere. While the NASA statement mentions that when Jubilee took over milk farmers were getting Kshs 35 per litre while consumers paid Kshs 72 per litre, and that today farmers still get Kshs 35 while consumers pay 120 per litre, the economics of milk prices is a complex one, not attributed to the processor alone. Brookside collects milk from over 160,000 farmers every day.
Safari com: MP’s from the NASA side have accused Safaricom, arguably Kenya’s most successful company, and some of its employees who they publicly named, of enabling incorrect election results to be transmitted during the August 8 elections, something which the company has denied and also expressed concern that their employees had been needlessly endangered as they did their jobs and the company merely fulfilled a contract to support the 2017 Kenya general election.
NASA MP’s have gone ahead to public switch from using Safaricom to rival Airtel, even as Safaricom dealers warned of dire effects for their employees and communities.
— NASA Coalition (@CoalitionNASAKe) November 6, 2017
Safaricom has 6 of its 45 shops in the Western/ Nyanza Region which is the bedrock of NASA support. Whether this is a turning point for Airtel in Kenya as a company which has branded as Kencel, Celtel, and Zain and which has steadily lost ground and value to Safaricom over the years, remains to be seen.
— Robert Nagila (@Rnagila) November 7, 2017
But members of parliament from ODM (the main party in NASA) have in the past voiced critical comments about some of their issues with Safaricom from even before the 2017 election – especially during debate on the gambling and sport betting bills in the last parliament, earlier this year.
Gumbo: Safaricom supports social media which is a forest of mediocrity #BungeLiveKE
— Mzalendo (@MzalendoWatch) February 9, 2017
Here are some comments by Nicholas Gumbo, the then-Member of Parliament for Rarieda and Chairman of the Public Accounts Committee in the National Assembly.
Gumbo: Safaricom makes billions doing what? It destroys tangible economic activity #BungeLiveKE
— Mzalendo (@MzalendoWatch) February 9, 2017
Then-Member of Parliament for Gem and Deputy Minority Leader, Jakoyo Midiwo threatened on more than one occasion to introduce legislation to break Safaricom.
Midiwo: The sports betting companies are controlled by Safaricom, which we must next break into three companies #BungeLiveKE
— Mzalendo (@MzalendoWatch) February 16, 2017
Bidco: The edible oils company is probably the most vulnerable of the three brands, and was likely targeted because its group chairman Vimal Shah, is the chairman of MKenya Daima an offshoot of the Kenya Private Sector Alliance (KEPSA), of which he’s a past Chairman, and which has throughout the election season been championing for respect of the election outcomes, grievances to be addressed in the constitutional ways (through the courts), for politicians to be careful about their public utterances and for normal business life to resume. KEPSA recently released a statement that read:
This is why we have consistently called Kenyans’ attention to the disastrous economic consequences of the present uncertainty which affects all Kenyans. The Private Sector having reviewed the loss and has estimated it to be about 10 per cent of the GDP equivalent to Kshs 700 Billion
Earlier this year, Bidco announced plans to become a billion dollar turnover (Kshs 103 billion) company by 2021 (their current turnover is Kshs 25 billion) by diversifying into the production of fruit juice, soft drinks, and cereal products.
Yesterday Saudi Arabia, the United Arab Emirates, and Egypt led a handful of other countries including Bahrain, Yemen in severing diplomatic relations with Qatar – and these have now extended to some Qatar Bank sanctions.
- The three Gulf states gave Qatari visitors and residents two weeks to leave their countries.
- Saudi also closed the border and halted air and sea traffic with Qatar, urging “all brotherly countries and companies to do the same”
- Bahrain’s withdrew its diplomatic mission from the Qatari capital, Doha, within 48 hours
- The UAE ordered Qatari citizens to leave the country within 14 days and banned its citizens from traveling to Qatar.
- Egypt also announced the closure of its airspace and seaports for all Qatari transportation “to protect its national security”.
- UAE-based carriers Emirates, Etihad Airways, and FlyDubai said they would suspend flights to and from Qatar beginning Tuesday morning.
During my recent trip to the Middle East I stated that there can no longer be funding of Radical Ideology. Leaders pointed to Qatar – look!
— Donald J. Trump (@realDonaldTrump) June 6, 2017
Qatar Airways which flies to over 150 destinations was barred from flying over UAE and Saudi Arabia. They have complied, which now leads to some interesting flight radar maps.
IMAGE: Qatar Airways today pic.twitter.com/BXFndeFyZW
— The Spectator Index (@spectatorindex) June 6, 2017
Continuing the onslaught which was apparently green-lit by US President Trump, financial sanctions were now announced today targeting Qatar banks and finance including:
- Banks in Saudi Arabia, UAE & Bahrain HAVE suspended transactions to banks in Qatar, citing instructions by central banks.
- Saudi Central Bank told banks not to trade in #Qatari Riyals in addition to foreign exchanges
- U.A.E. banks not providing leverage on Qatar bonds
- Qatari riyal under pressure as Saudi, UAE banks delayed Qatar deals.
- UAE and Bahraini central banks had asked banks they supervise to report their exposure to Qatari banks
- Some Sri Lankan banks stopped buying Qatari riyals, saying counterpart banks in Singapore had advised them not to accept the currency.
- Commercial banks say that they stopped accepting Qatar Riyal as they have no way of repatriating and clearing them
Older pre-sanction report
- Qatari banks have been borrowing abroad to fund their activities. Their foreign liabilities ballooned to 451 billion riyals ($124 billion) in March from 310 billion riyals at the end of 2015, central bank data shows.
- So any extended disruption to their ties with foreign banks could be awkward, though the government of the world’s biggest exporter has massive financial reserves which it could use to support them. Banks from the United Arab Emirates, Europe and elsewhere have been lending to Qatari institutions.
- Because of its financial reserves and as long as it can continue exporting liquefied natural gas, Qatar looks likely to avoid any crippling economic crisis. But credit rating agency Moody’s Investors Service said on Monday that if trade and capital flows were disrupted, the diplomatic dispute could eventually hurt the outlook for Qatar’s debt.
Yesterday, the Sentry Group, whose mission is dismantling the financing of Africa’s deadliest conflicts, released a report on corruption in South Sudan. As the fighting in South Sudan has gotten worse, with the leaders unable or unwilling to pursue peace, it’s been an open secret that thy have economic links, some of which are in Nairobi, especially in real estate and banking.
Findings & Recommendations
- Even President Kiir and Vice President Machar themselves have acknowledged that corruption is at the core of the country’s current crisis. “An estimated $4 billion are unaccounted for or, simply put, stolen by former and current officials, as well as corrupt individuals with close ties to government officials,” President Kiir wrote in a June 2012 letter to government officials that was leaked to the press.
- Most of the funds that these kleptocrats have amassed appear to come from the oil, mining, foreign exchange, and banking sectors as well as food procurement and defense supply contracts from the government.
- South Sudanese leaders have paid lip service to the need for oversight, but public institutions have been transformed from entities that are supposed to safeguard the rule of law and provide social services into predatory entities that do quite the opposite.
- Top South Sudanese officials and their immediate family members hold stakes in numerous commercial ventures are not actually available to the public…Immediate family members of South Sudanese PEPs should be required to declare their assets.
- U.S. authorities, as well as their counterparts overseas—in places like Australia, the European Union, Kenya, and Uganda— should open investigations that could lead to the forfeiture of criminally derived assets and to the prosecution of those involved in profiting from corruption in South Sudan.
- Governments should thoroughly examine whether or not banks involved in these transactions fulfilled their due diligence, reporting, and compliance requirements.
- The facilitators and enablers of corruption and mass atrocities should be priority targets for sanctions designations. .. been facilitated—knowingly or not—by a wide range of lawyers, brokers, banks, and foreign companies.
- The U.S. government and U.N. Security Council have already sanctioned a series of mid-level commanders from both sides of the conflict in South Sudan. The failure to follow on these actions with any meaningful scrutiny of higher level targets muted any message these actions may have had, resulting in a perception in South Sudan that the international community is not serious about imposing consequences.
- Kenya and Uganda, in particular, have relatively solid anti-money laundering legal frameworks on paper that can provide a basis for action against corruption, as well as demonstrate that local laws are being violated by banks that process suspicious transactions on behalf of South Sudanese PEPs. These banks should already be conducting enhanced due diligence on South Sudanese PEPs, according to the FATF Recommendations, and taking other measures required to prevent suspicious transactions.
- Kenya Commercial Bank processed large payments from multinational companies operating in South Sudan into the accounts of two senior South Sudanese politically exposed persons over a period of several years.
- “Some of these ministers have bought apartments, have bought very beautiful houses, villas,” President Kiir continued. “They are hiding it in Kenya and they refuse to reveal it.” … A source within South Sudan’s government confirmed to The Sentry that the Kiir and Machar homes in Nairobi were close to one another in Lavington
- Violent takeover of KK Security”: One of Machar’s relatives became involved—albeit highly controversially—in KK Security, a Kenya-based company active throughout East and Central Africa.
For KCB, or any other Kenyan banks operating in South Sudan, they are really without blame. The report does not highlight if the transaction with the leaders were in Kenya or in South Sudan where they have 18 branches.
South Sudan is relatively small for Kenya banks, accounting for just 13% of assets outside Kenya (Tanzania is 39%, Uganda is 30%). In the absence of rules from the (regulator) Bank of Southern Sudan, (unlikely) or Kenya’s CBK, or the Kenya government, to freeze doing business with people who probably are in charge of other South Sudan government accounts at the bank, is asking too much.
Getting There: If flying from Nairobi, you have an option of either Kenya Airways (KQ) or Ethiopian Airlines. Kenya Airways operates both a late night (23:55) and a late morning (11:00) flight from Nairobi that costs about $600. For the Ethiopian flight, you will have to connect via Addis Ababa but it’s cheaper at about $450.