International Finance
Banking and Finance January-February 2019 Magazine

East Africa’s money-laundering scandals

East Africa’s money-laundering scandals
There appears to be an elaborate plan to launder money in countries like Kenya and Uganda, but US officials have gotten a whiff of these scams and have issued ultimatums to these nations’ leading financial bodies to either clean up their act or face dire consequences

Kenya Commercial Bank (KCB), East Africa’s biggest lender by asset base and most profitable has been linked to money laundering on behalf of corrupt government officials in South Sudan, including senior military leaders sanctioned by the United Nations in the wake of the civil war which erupted in December 2013.
Also thought to be culpable includes the local Stanbic Bank which is member of the Standard Bank Group, based in Johannesburg, South Africa.
Predictably the two lenders have to date denied involvement in the fishy business.
On its part KCB ‘s Group CEO, Joshua Oigara said the lender being a regulated entity deployed global standards and had no proclivity to engage in money laundering in all the countries of its operations including Burundi, Kenya, Rwanda Tanzania , Uganda and South Sudan.
“KCB South Sudan continues to work closely with the Government of South Sudan and the Bank of South Sudan with regards to resolutions on UN Security Council Sanction List 2206,”Oigara said in a press release.
According to data from the Central Bank of Kenya (CBK), the monetary authority of Kenya, East Africa’s biggest economy, nine local banks had subsidiaries within the East Africa Community (EAC), which draws in six countries including, Burundi, Kenya, Rwanda, South Sudan, the United Republic of Tanzania, and the Republic of Uganda, with its headquarters in Arusha, Tanzania.
According to the US-based Sentry organization, a two-year investigation into the corruption in South Sudan, money movement and assets locations, found KCB has taken part in abetting money laundering on behalf of the elite in South Sudan.
East Africa’s money-laundering scandalsAmong the senior army generals in South Sudan who the report named as culpable was General Gabriel Jok Riak, who was called out for transferring hundreds of thousands of US dollars to his personal bank account in the Kenyan bank yet his monthly salary was less than $3,000 dollars, or only about $35,000 a year.
General Riak, commander of Sector One, which includes Divisions 3, 4, and 5, of the South Sudan’s army, the Sudan People’s Liberation Army (SPLA), has been under the United Nations sanctions for his brutality during the civil war. His known assets have been frozen and he is banned from travelling to foreign countries.
“Specifically, Gen. Jok Riak had command authority over a full-scale 2015 offensive across three states in violation of multiple ceasefires and resulting in the displacement of over 100,000 people and the commission of grave war crimes,” said The Sentry report, titled ‘War Crimes Shouldn’t Pay.’
“Bank records reviewed by The Sentry indicate that Gen. Jok Riak received large financial transfers totaling at least $367,000 to his personal bank account at Kenya Commercial Bank (KCB) from February to December 2014 alone—sums that dwarf his official annual salary of about $35,000,” The Sentry report revealed.
Also indicted include General Reuben Riak Rengu, who the report revealed was directly involved in procuring weapons and planning military offensives but also is involved in a wide range of commercial ventures and had received substantial payments from multinational firms from at least three countries that operate in South Sudan through KCB.
“Although Gen. Reuben Riak’s official annual salary is about $32,000, information obtained by The Sentry suggests that he is living well beyond what such a salary would support and appears to have received hundreds of thousands of dollars in payments from numerous multinational companies active in South Sudan,” the report revealed.
General Reuben has illegally transferred to his personal bank account at the Kenya Commercial Bank millions of US dollars, despite having a salary of less than $3,000 dollars a month.
“Documents reviewed by The Sentry show $3.03 million moving through Gen. Reuben Riak’s personal bank account—a US-dollar denominated account at Kenya Commercial Bank (KCB)—between January 2012 and early 2016,” the report further revealed.
The transactions recorded, it said, include more than $700,000 in cash deposits and large payments from several international construction companies operating in South Sudan.
Additionally, the report showed that over this four-year period, $1.16 million US dollars in cash was withdrawn from his KCB account.
The report further revealed documented proofs that General Reuben and many of his children have. According to the report, international banks are looking to mitigate the risk stemming from South Sudan’s banking sector in order to avoid regulatory fines and reputational harm.
“Larger banks operating in East Africa have a network of correspondent relationships and help connect smaller South Sudanese banks with the global financial system. Because of these ties to the regional correspondent banking network, South Sudanese banks hold nested accounts in Kenya and Uganda.” says Sentry. shares in companies operating in South Sudan.
Late this June, Ms. Sigal Mandelker, the US Treasury’s under-secretary for terrorism and financial intelligence while on a tour of East Africa publicly stated that some South Sudanese who are under UN sanctions had continued to invest illicit money in Kenya’s real estate market.
“I want to be very clear, those who profit from human rights violations and corruption, preying on the poor and innocent and mothers and children, must heed our warning,” Mandelker said at a press conference here in Nairobi.
“We will impose consequences, we will cut off your access to the US financial system and we will work with our partners in this region and elsewhere to do the same,” she added, repeating a warning she had delivered earlier in the week in neighbouring Uganda.
The political and military elite in South Sudan have been accused of corruption in hard-hitting reports by the US foundation The Sentry, co-founded by actor George Clooney.
Also thought to be involved in money laundering using Kenyan lenders include President Salva Kiir and his vice president Riek Machar. Both are said to have profiteered from the civil war, acquiring waste of the art homes in Kenya and neighbouring Uganda.
Mandelker said she met with top officials in Kenya’s government and the banking sector to urge them to watch out for money laundering from South Sudan.
She asked them to ban South Sudanese who have been on a US black list since 2015 and to freeze their bank accounts and seize their properties.
“Corrupt money is not wanted here,” she said.
“Those who profit on of the backs of individuals who are devastated by human rights abuses will no longer have access to the international financial system because we will block that access, kick them out and we will work together to eliminate such despicable profiteering.”
The Treasury under-secretary urged officials in Nairobi and Kampala to close loopholes that allow transfer of illicit funds from South Sudan.
“We hope Under Secretary Mandelker’s engagement with Kenyan authorities and banks will spark official inquiries into real estate purchased by South Sudanese officials potentially to hide unexplained wealth obtained in the context of war,” John Prendergast, co-founder of The Sentry, said after the visit of the US Government mandarin.
“Investigating, and if appropriate, seizing these homes would provide tremendous leverage for the peace process, and would be a critical step toward accountability for the systematic looting and mass atrocities committed since the country’s independence in 2011,” he said.
Kenya and Uganda do have the legal tools needed to investigate the suspect real-estate transactions and, if warranted, to seize those properties, The Sentry said.
The group notes that information it had provided led Australian authorities to initiate the seizure earlier this year of a Melbourne home owned by former South Sudanese Gen James Hoth Mai.
The Sentry has urged the Kenyan government to “follow Australia’s model to investigate unexplained wealth.”
“With support from NGOs, domestic banks and U.S law enforcement, Kenya — East Africa’s banking capital and home to a large South Sudanese Diaspora — is well-placed to take the lead in pursuing potentially corrupt assets,” The Sentry adds.
Early this Oct Mr. John- Alan Namu, CEO and Editorial Director of Africa Uncensored, an independent media house based in Kenya that specializes in unraveling nefarious acts that happen within the East Africa region had an expose on the money laundering business banned from running on one of Kenya’s top TV stations underlining the influence and perceived power local lenders and the elite South Sudanese have within the East Africa region.
“It is possible that money launderers have identified Kenya as a ‘safe haven’ to store ill-gotten wealth as the country boasts a robust economy with political stability. Hence, country dynamics (macro-economic and business environment) play an important role. Further, given Kenyan banks operate in the region, efficient movement of funds both to and from the domestic market is achieved,” said Patrick Mumu, an analyst at Genghis Capital, a local investment bank.

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