A KENYAN anti-corruption drive uncovered the equivalent of tens of millions of dollars in unexplained wealth when it retired old banknotes, the central bank said on Wednesday, adding that much of the cash appeared to have been gained in ‘the criminal area’.
The East African nation has a diverse, fast-growing economy, but foreign investors have long complained of widespread graft and weak application of anti-money-laundering laws.
On June 1, the central bank set a September 30 deadline for everyone to convert their old 1,000 shillings notes, worth about $10, into new ones after it became the banknote of choice for criminals of all types in the East Africa region.
Those exchanging large amounts were required to explain how they acquired the cash. The move was designed to stop the flow of the proceeds of crime, such as corruption and counterfeiting of banknotes, through the financial sector.
Bank governor Patrick Njoroge said notes worth KSh7.4bn ($71.29 million) were not exchanged, rendering the cash invalid and hitting the suspected corrupt owners hard.
‘These are people for the most part that maybe had some concerns in terms of going through the checks,’ he told a news conference.
The money is equivalent to a quarter of the annual budget of the government’s top hospitals in the country, Njoroge said. It also marks the first time in the country that the corrupt have been made to lose a huge chunk of their wealth, with the biggest ever corruption fine handed out by the courts standing at KSh52 million, he added.
Commercial banks, which processed amounts up to 5-million shillings, flagged some 3,172 transactions as suspicious and reported them to the authorities during the conversion exercise over the four months. Njoroge said that information will be used by other investigative agencies, including the tax authority, to uncover more cases of handling of the proceeds of crime.
‘You have those that didn’t want to pay taxes and were working in the sort of criminal area. Those, to begin with, have just been taxed the full value of their wealth,’ he said.
Very large amounts above 5 million had to be converted at the central bank.
The process of invalidating the old notes, known as demonetisation, had not resulted in inflationary pressure or weakening of the foreign exchange rate, Njoroge said.
In 2016, India abruptly scrapped high-value currency notes, throwing its cash-based economy into a crisis. Njoroge said Kenya had learnt lessons from the chaos in India and that is why there was a four-month window.
The effort to stamp out corruption will be sustained, he said.
‘It cannot be that we glorify people who are involved in crime. It cannot be,’ Njoroge said.