The Kenyan government has recommended stringent regulation of virtual currency as one of the most effective strategies in securing its jurisdiction as a secure financial hub from illicit financial flows.
Secretary for National Administration in the State Department of Internal Security Beverly Opwora observed the country has robustly pursued amendments to laws in appreciation of the dynamic money laundering risks related to predicate offences such as drug trafficking.
“We have proactively amended The Proceeds of Crime and Anti-money Laundering Act (POCAMLA) that has lessened the reporting time of suspicious activity reduced from seven days to two days in cognizance of the need for timely interventions,” she said.
“Kenya amended cash transactions threshold to fit within the Financial Action Taskforce (FATF) standards - USD 10,000 to USD 15,000.”
Opwora also said there are issues that the government has observed in the typology and trend of illicit financial flows.
For instance, she said, the use of mobile money to receive payments related to the sale and distribution of narcotics shows the funds are accumulated and withdrawn in cash.
“This method is preferred by perpetrators as it evades conventional banking and associated controls for cash deposits and withdrawals.”
She added they have also observed the sending of money disguised as payment of consultancy to a jurisdiction known to be a source of narcotics drugs.
There has also been the mixing of proceeds of drug trafficking with the proceeds of business to disguise the source.
She talked during the ongoing 31st Heads of National Drug Law Enforcement Agencies in Africa (HONLAF) in Abuja Nigeria.
Kenya is represented by the Ministry of Interior and National Administration, the National Authority for the Campaign Against Alcohol and Drug Abuse (NACADA), the Pharmacy and Poisons Board (PPB) and the Financial Reporting Centre (FRC).
Acting Director of Financial Intelligence, Analysis and Reporting at the Financial Reporting Center in Kenya Thomas Kathuli said the amendment of the law has allowed the acquisition of intervention powers to preserve funds suspected to be linked to illicit financial flows.
This, he said, is particularly critical in ensuring funds linked to drug trafficking are preserved immediately.
“We have also upscaled our activities towards updating suspicious transaction reporting guide for reporting institutions to include the new emerging typologies to enable them to detect suspicious transaction activities,” said Kathuli.
She said financial investigations are crucial in detecting drug trafficking syndicates, the players involved, financial flows, assets involved, jurisdictions of operation and channels exploited.
He added FRC not only furnishes law enforcement agencies with financial intelligence but also assists in the provision of information for ongoing cases and investigations.
“It is difficult to know the source of funds sent as crypto to determine whether it proceeds of crime or not. One can send virtual currency from anywhere and withdraw from ATMs immediately or via wallet mobile in small amounts that do not raise suspicion,” he said.
He said the rapid evolution of financial technologies and the increasing prominence of virtual assets has brought forth new challenges and opportunities for the financial sector.
There is concern that virtual assets can be abused to facilitate payments related to narcotics and drug trade, he added.
“However, the Financial Reporting Centre has not received any suspicious reports on cryptocurrency used to facilitate drug trade in the country.”