Kenya’s Killer Punch against Financial crimes

Dr.  Njoroge: Governor Central Bank:
He wrongfooted the "mattress bankers"
 Financial crimes in Kenya, which includes; theft of public resources, tax evasion and money faking and fraud faces a killer punch. The Central Bank of Kenya has launched new banknotes and immediately demonetized the 1000 shilling note.
The banknote is the highest store of value in Kenya and very popular with those involved in financial crimes including fakers. The current one will cease to be a legal tender in four months’ time, on October 1.
This is a killer punch because it tightens the noose for “mattress bankers.” Many are, of course, involved in financial crimes. That is why the money cannot be banked for fear it will be traced to them. The rules of retiring the old note are stringent, geared to expose the owners of the money.  This leaves the mattress bankers with only two options: bring it out and answer questions, and perhaps, face the law or go bust.
 The option of facing the law is not attractive given the stiff penalties already imposed on proven graft cases. Read  Many could opt to let the wealth go to waste, after all, they never worked for it. Their money could soon be museum pieces!
The rules allow those who hold less than one million shillings in one thousand shilling notes, to walk to the nearest bank and get it replaced provided they provide proof of ownership.  Those holding between one million  and five Million shillings will have to go to their banks where they hold accounts and are known and provide the usual proof.
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Those holding  between one Million and five Million in one thousand shillings notes and do not have bank accounts will have to take it to the Central bank for replacement.  
That is a catch22 situation: The corrupt cannot just walk to a bank and deposit large volumes without answering some nasty questions. The thought of visiting the Central bank is definitely a nightmare.  And the commercial banks, smarting from hefty fines imposed on them by the Central Bank for handling money stolen from the National Youth service, NYS, will be watching their backs.
The Kenya Bankers’ Association has warned that there will be no escape for financial criminals who hold large volumes of illicit money in their homes. And these are the targets of the new order in Kenya’s money world. The association has warned that not even buying assets such as buildings, and vehicles will clean the money. They are right!
Kenya has advanced in electronic funds transfer system. Even supermarkets and other traders accept electronic transfer using Mobile money transfers. Large financial transactions are effected through electronic Cash transfers which are secure and reliable. This means that hefty cash purchases of high-value assets will be red flagged suspicious!
And given that some are suspected to hold tens, if not hundreds of millions of illicit cash, that cannot be spend overnight, the order must be a nightmare for them.
So what to do?  Tough Choices! The financial criminals cannot even use their relatives and friends to clean the money as they will have to explain how they made the money to the banks. This leaves only one other choice: using perennial litigants to try and stall the implementation of the demonetization.
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Two of these litigants have already filed suits seeking to stall the move. However, it remains to be seen whether any Judge will be foolhardy to stall it. Already the judiciary is being viewed as protectors of the corrupt and other criminals by issuing orders that amount to an abuse of office.  It has to be extremely careful how they tackle this matter lest it turns out to be the proverbial “last straw that broke Carmel’s back.”
 The move to demonetize the 1000 bank note, is apparently the final part of the strategy to make financial crime expensive in Kenya. It comes hot on the heels of the move to nationalize physical assets of graft suspects if they cannot account for it. Already, the anti-graft body has recovered an estimated US$ 300 million of such assets. The Assets Recovery authority, another institution whose mandate is to recover assets suspected to be acquired with proceeds from crime has also recovered some assets and is in the process of recovering others.
 In effect, financial criminals will soon be reduced to paupers: if they have not found a way of disposing of the money stashed in their mattresses, it would soon turn into worthless paper. Also, Read
The other parts of the strategy to make financial crime expensive includes creating a multi-agency investigating team, which ensures that all skills are put together to investigate any suspected crime.  
The entry of National Intelligence Service into active investigations must worry a number of people and scare others for these can out ghost anyone.  And the sleuths are playing a major role in the war against crime, including financial crimes.
All security agencies in Kenya, including the Police, the Directorate of Public Prosecutions, and the Ethics and anti-Corruption authority are now managed by people who cut their teeth in either military or civilian intelligence. The National Intelligence Service itself is headed by a former Chief of military intelligence. The message is clear here: There is no place to hide for criminals, not even for corrupt judges!
A similar multi-agency structure, created to fight the Somalia based terror group Al- Shabaab, has proven lethal to the terrorists. The forces on the ground are under one command which has eliminated bureaucracy in sharing intelligence and operations.
All it takes is a distress call for other units to swing into action in support of Kenyan forces in Somalia. Although it has not eliminated Al-Shabaab, the strategy has degraded the militants and also reduced terror attacks on Kenyan soil.
 The corrupt and other financial criminals face a similar fate because, the multi-agency team, in this case, involves the Central Bank.


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