Treasury wants proof of income from used car dealers and buyers
Car dealerships will be required to reveal the identities of buyers and their sources of income if Treasury proposals to close loopholes in money laundering and the flow of illicit money are passed.
The Treasury also wants the source of cash for car dealership owners verified, warning that this weak regulation of the used-car market makes the business attractive to drug dealers and fraudsters.
Treasury Cabinet Secretary Ukur Yatani is calling for a revision of the law to allow second-hand car market transactions to be filed with the Financial Reporting Center (FRC), which is mandated to track illicit cash.
The review will see used motor vehicle dealers designated as non-financial reporting institutions, as well as entities and professionals such as casinos, accountants and real estate agents.
There will be more control over the source of the money car dealerships deposit in banks to prevent launderers from using them as front companies who can claim the money as a legitimate business product.
Car dealers will be required to disclose the names, addresses, date of birth, identification number and occupation of buyers as well as the date of the transaction and the amount involved, among other things.
Imported second-hand vehicles account for 90% of Kenyan car purchases – 107,499 in 2021 – and gobble up precious foreign currency of nearly 100 billion shillings a year.
“Car dealerships should be designated as reporting institutions for the purpose of reporting suspected money laundering to the FRC,” Mr. Yatani said in a money laundering risk review report.
“The threat of money laundering at used car dealerships is rated as medium high due to weak regulatory controls.
There is likely an increase in the threat level in the future due to the lack of clear regulations to monitor the sector.
Anti-money laundering rules make it difficult to deposit large sums of money generated from illicit activities directly into Kenyan banks.
Owners of illicit money may hand over money to money launderers who own or control car dealerships.
If the bank receiving the money does not collect enough information from the second car dealership, it becomes more difficult to determine the source of the funds.
Findings from a previous FRC risk assessment study showed that used car companies were closing deals worth millions of shillings in cash without questioning the sources of income from buyers.
The anti-money laundering watchdog believes suspicious cash transactions in car sales, the majority of which are valued at over a million shillings, typically take the form of walk-in purchases or deposits. you, with the balance being cleared in installments.
The FRC believes that drug dealers and fraudsters are eager to buy cars, land and houses, often in cash.
Owners of illicit cash have been singled out for buying used cars in an attempt to sell and clean up their dirty money.
“For them [car dealers], there is a big challenge because it is an industry that is not regulated. Other than the NTSA issuing license prescribing them as used dealers, it is more or less unregulated. This is a challenge in itself,” FRC Director General Saitoti ole Maika said earlier.
The Proceeds of Crime and Anti-Money Laundering Act (Procamla) requires designated financial and non-financial institutions and professionals to report suspicious or unusual transactions to the FRC – the agency established in April 2012 to identify and combat money laundering and the financing of terrorism. .
In addition to reporting suspicious transactions, regulations require designated companies to submit an annual compliance report to the FRC by January 31 of the following year.
The push for car dealerships to report suspicious transactions comes at a time when the state has added more businesses and professions to the list of entities subject to reporting obligations.
Lawyers, employees of accounting firms and trusts holding assets for high net worth individuals are required to report suspicious transactions and transactions to the FRC.
Trustees have been included in the list amid suspicion that trusts are becoming the vehicles of choice for laundering the proceeds of crime and corruption.
Lawyers are targeted in real estate transactions, bank account management, business acquisitions and start-up creation.
They have recently emerged as a weak link in the fight against money laundering by using bank accounts to deposit customer money as a shield to report to the FRC.
Kenya has been singled out for illicit money entering the country through crime, drugs, corruption and shady business activities, exemplified by houses in leafy suburbs and luxury cars.