Number of the Week (16): Why infamous ‘Panama Papers’ are not new to Kenya
Number of the Week (16): Why infamous ‘Panama Papers’ are not new to Kenya
| Post date: Wed, Apr 6, 2016 | | Category: Corruption | |
The revelation of illicit financial flows in the infamous “Panama Papers” is not unique to Kenya. But what are Panama Papers and how are they related to the Illicit Financial Flows? Panama papers1 comprise more-than 11 million documents, which date back four decades ago and are allegedly connected to Panama law firm Mossack Fonseca. According to CNN, The International Consortium of Investigative Journalists (ICIJ) reports that the firm helped establish secret shell companies and offshore accounts for global power players. A 2015 audit by ICIJ found that Mossack Fonseca was privy to identities of some real owners of the involved companies, which it had incorporated in Seychelles, an Indian Ocean archipelago that are often described as a tax haven. Kenya has also been victim to illicit financial flows, one such case in point is the Pyramid Scheme, which was also highlighted in the Daily Nation on April 4, 2016. The incident is about the founder of Clip Investment Sacco Ltd, a Kenyan, who is accused of fleecing more than Sh1.9 billion from 5,846 clients. He is among several Kenyans named in secret records of a Panama law firm for setting up two offshore dummy companies.
This week we provide analysis of the trend in the losses that Kenya suffers as a result of illicit financial flows. The data is obtained from Global Financial Integrity (GFI) and the opportunity cost of the loss has also been elaborated.
- A drug cartel using trade-based money laundering techniques to mix legal money from the sale of used cars with illegal money from drug sales;
- An importer using trade mis-invoicing to evade customs duties, VAT, or income taxes;
- A corrupt public official using an anonymous shell company to transfer dirty money to a bank account in the foreign country;
- A human trafficker carrying a briefcase of cash across the border and depositing it in a foreign bank, etc.
The chart above shows the trend in the IFFs for 2004, 2005, 2007 and 2013 in US dollars and comparative values in Kenya shillings that were moved from Kenya to foreign countries. For the missing years, the Global Financial Integrity Report indicated nil illicit financial flows.
As shown in the chart, in 2004 the total amount of recorded IFFs was US$ 82 Million (Ksh 6 billion) and in 2013, it tripled to record US$ 255 million (Ksh 22 billion).
Number of the Week: Ksh 16 billion
- The total recorded Illicit Financial Flows (IFFs) that were transferred from Kenya to foreign banks amounted to US$ 829 million (Ksh 64 billion).
- Kenya loses Ksh 16 billion annually through illicit financial outflows.
- This amount is equivalent to 30% of the Ksh 53 billion laptop project by the government.
- The annual IFFs loss of Ksh 64 billion is equivalent to 20% of the SGR project (Mombasa-Nairobi phase which is estimated to cost Ksh 327bn).
[1] http://www.cnn.com/2016/04/04/world/panama-papers-explainer/index.html?eref=rss_topstories
More Number of the Week
Most people in Kenyan prisons serve shorter sentences
83% are imprisoned for less than 2 years, including those held for less than 1 month. 16.3% of prisoners are convicted for 2 years or more, with 0.5% sentenced to life imprisonment and 0.2% added to the prison population. The Number of the Week is 83%, the share of prisoners convicted for less than two […]
Kenya’s comparison of Out of pocket expenditure on Health with its peers
In the advent of increased Non-Communicable Diseases such as cancer that require long time treatment, reduction of the Out-of-pocket payments is key in sustaining affordability and access to health care services. These can be achieved through increased insurance both by the government and the private sector.
Outstanding Stock of Treasury Bonds by Holders
Treasury bonds are a secure, medium- to long-term investment tools that typically offer periodic interest payments semiannually throughout the bond’s life. The Central Bank auctions Treasury bonds on a monthly basis, but offers a variety of bonds throughout the year, so prospective investors should regularly check for upcoming auctions. Outstanding Treasury Bonds increased by 11.2 per cent to Ksh 1,152,041 million in June 2016 from Ksh 1,035,662 million in June 2015.
Outstanding Stock of Treasury Bills by Holders
In June 2016 compared to June 2015, the stock of Treasury bills increased by 84.4 per cent to Ksh 588,088 million from Ksh 318,929 million while the proportion held by commercial banks increased by 67.4 per cent to Ksh 361,859 million from Ksh 217,742 million. In the same period, holdings by pension fund institutions increased to 20.1 per cent from 12.8 per cent while proportion held by insurance companies decreased to 3.1 per cent from 6.5 per cent.
Outstanding Stock of Treasury Bills and Bonds by Holders
The medium term debt strategy for the financial year 2016/17 emphasized on the need to develop the domestic market by increasing the issuance of Treasury bonds over the medium term. The strategy targeted a mix of 60 percent and 40 per cent for external and domestic financing, respectively.