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FRC flags 48 realtors and casinos without illicit deals safeguards
The activities of real estate agencies, casinos and betting firms have become areas of enhanced tracking as the government clamps down on economic crimes such as financial terrorism and racketeering.
Kenya’s financial intelligence agency has identified 24 real estate agencies and a similar number of casinos that were operating in the country without any anti-money laundering safeguards, triggering the issuance of guidelines to lower risks of illicit financial flows through such entities.
The Financial Reporting Centre (FRC) latest report shows that the agency discovered the exposure during a 2023 risk profiling exercise, which covered 80 real estate agencies and 47 casinos in the country.
The findings of the exercise, which assessed the level of money laundering and terrorism financing risk at various institutions in the country, prompted the FRC to respond with a deeper risk-based inspection, which led to the issuance of guidelines in the financial year ended June 2024.
Some of the key loopholes discovered were the absence of anti-money laundering and combating the financing of terrorism policies and the inadequate training of real estate agents and casinos staff on the same.
The inspection also found that many real estate agencies and casinos were not carrying out due diligence on their customers. The entities were also not reporting suspicious transactions to FRC as is required by law.
The Proceeds of Crime and Anti-Money Laundering Act provides for a fine of up to Sh5 million or imprisonment for up to three years, or both, for any person or reporting institution that contravenes any provision of the Act.
FRC said 27 real estate agencies were identified as posing medium risk, while 29 posed low risk. At the same time, 17 casinos were identified as posing medium risk and seven as low risk.
“The results of the exercise (on real estate agencies) translated into the development of a risk-based inspection plan of the profiled real estate agencies … The outcomes of the exercise (on casinos) also informed subsequent risk-based supervisory actions for the sector,” said FRC.
The FRC responded with guidelines to real estate agencies and casinos to tighten oversight on their activities. This was in addition to the guidance circulars on beneficial ownership and cash transaction reporting and the risk-based approach guidelines it had issued earlier.
The activities of real estate agencies, casinos and betting firms have become areas of enhanced tracking as the government clamps down on economic crimes such as financial terrorism and racketeering.
Gambling activities are considered a high-risk area for money laundering, given that proceeds from sports betting can easily be commingled with funds from predicate crimes. Predicate offences, also known as underlying offences, are illegal activities that generate money from unlawful sources to be laundered so as to appear legitimate.
Such money is then passed off as genuine winnings, with a possible collusion over who receives the winnings, which are later either reverted into the syndicate or transferred out of the country.
The FRC and other regulators in the country are keen to tighten checks on transactions in the financial systems as part of efforts to get the country out of the Financial Action Task Force grey list. The country was grey listed on February 23, 2024.
