Kenya should fix gaping holes in beneficial ownership transparency and anti-money laundering regimes to improve its runaway financial secrecy rankings.
Tax Justice Network says Kenya needs to improve access to beneficial ownership information especially those of private companies that are currently limited.
Experts want enforcement bodies, local tax authority like KRA and financial recovery center given more access to data on beneficiaries of privately owned firms.
“Kenya’s beneficial ownership transparency and anti-money laundering regime require significant strengthening,” said TJN in the Financial Secrecy Index 2020.
The latest TJNA financial secrecy index shows Kenya’s contribution to global financial secrecy worsened, taking its ranking up from 27th on the 2018 index to 24th in 2020.
Kenya now has the second highest secrecy score in Africa.
“Kenya has ambitions for Nairobi International Financial Center with separate legislations that investors would leverage on to invest in other markets within the continent with lower taxes and more tax reliefs, that is why is the country is ranked highly than other nations in the continent,” said Tax Justice Network’s Anglophone African Hub Researcher, Rachel Etter-Phoya.
She spoke on Tuesday during the ongoing virtual forum for tax justice advocates in Africa, themed, Tax Justice Advocacy: Increasing Participation of Civil Society Organizations (CSOs) and Journalists through Capacity Building.
The training programme aims to empower the target groups with skills to identify, track, and report illicit outflows from the continent.
Rachael argues that even though secrecy is a problem in Kenya, establishment of the International financial in Nairobi may undermine revenue collection in other African countries.
The hub could potentially be exploited by world’s worst offenders including USA, Switzerland and Cayman Islands which do far more damage according to the index.
Sealing loopholes in regulatory structures, the index report shows would help curb a potential rise in illicit financial flows out of the country when it sets up the proposed Nairobi International Financial Center.
“A strong secrecy regime combined with a corruption ridden economy is certainly a recipe for disaster with the potential to facilitate illicit financial activity without the need of accessing offshore jurisdictions,” according to the index.
Section 17 of the Nairobi International Financial Centre Act stipulates that any person connected to the Nairobi International Financial Centre Authority or who has access to any information relating to the affairs of the Authority shall not divulge any of that information unless disclosure is required by law or by a Court of law.
Disclosure in contravention of this section constitutes an offence liable to a fine not exceeding approximately US $2,000 or an imprisonment term not exceeding three years or both.
Kenya kicked off efforts to transform Nairobi into a financial centre over a decade ago with the aim of bench-marking with the likes of Dubai and Mauritius.