Construction main culprit in cleaning dirty money, says report

Over half of private companies fingered for money laundering are in the construction sector, according to a government report that sheds fresh light on the prevalence of shady dealings in the cash-intensive sector.

The National Risk Assessment On Money Laundering and Terrorism Financing of Legal Persons and Legal Arrangements – Kenya report published by the Business Registration Service (BRS) shows that 10,733 registered private firms were reported for money laundering in 2022.

More than half (56.5 per cent) of the private entities that were reported for money laundering were involved in the construction sector, signaling the rapidly growing segment as a preferred conduit for cleaning dirty cash.

This was followed by real estate (8.07 per cent), manufacturing (7.17 per cent), money transfer agents (5.83 per cent), consultancy (4.48 per cent), textiles (4.04 per cent) and retailers (3.14 per cent).

“The legal structures that had been abused for money laundering purposes were mostly involved in construction, real estate, manufacturing and financial services,” said the report.

The construction sector is one of the fastest growing in Kenya and contributed about 7.1 per cent of the country’s Gross Domestic Product (GDP) in 2022, according to the Kenya National Bureau of Statistics (KNBS).

The report has revealed that legal entities are being used by individuals for corruption, tax evasion, sanctions evasion, shielding assets from confiscation, money laundering, terrorist and proliferation financing and other crimes.

It shows that trusts and private companies in particular are the most used legal entities for money laundering compared to public companies, foreign companies, partnerships, unlimited companies and companies limited by guarantee.