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Cablegate: Kenya Terrorist Finance: Illicit Cash Couriers

VZCZCXYZ0000
PP RUEHWEB

DE RUEHNR #0875/01 0541004
ZNR UUUUU ZZH
P 231004Z FEB 07
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC PRIORITY 7708
INFO RUEHXR/RWANDA COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEAHLC/HOMELAND SECURITY CENTER WASHDC

UNCLAS NAIROBI 000875

SIPDIS

SENSITIVE

DEPT FOR AF/E, AF/RSA,
DEPT FOR EB/ESC/TFS KATHERINE LEAHY AND LEANNE CANNON S/CT for Patty
Hill, and S/CT Finance Galer and Novis
JUSTICE FOR AFMLS, OIA, AND OPDAT
TREASURY FOR FINCEN
TREASURY FOR VIRGINIA BRANDON

SIPDIS

E.O. 12958: N/A
TAGS: EFIN ETTC KTFN PREL PTER KCRM KE
SUBJECT: Kenya Terrorist Finance: Illicit Cash Couriers

REF: State 016120

SENSITIVE BUT UNCLASSIFIED FOR USG USE ONLY.

1. (SBU) Summary: Kenyan officials share USG concern over cash
couriers and money laundering, partly because of cash smuggling over
the Somali border. Kenya's draft anti-money laundering (AML) bill
contains provisions requiring declaration of monetary instruments
over USD 5,000, criminalizes willful failure to declare, and
authorizes officers to seize suspicious money temporarily. Until
the bill is passed and regulations implemented, Kenya Revenue
Authority (KRA) Customs will be more diligent in requesting
declarations and reporting more detailed information to the Central
Bank of Kenya (CBK). End summary.

Current Cash Declaration Regime is Weak...
------------------------------------------
2. (SBU) EconOffs transmitted the reftel demarche and background
documents to the Government of Kenya's (GOK) inter-agency AML Task
Force and then met on February 22 to discuss the issue with them.
The Task Force shares USG concerns over cash couriers and money
laundering, partly because of cash smuggling over the Somali border,
but also because it is regarded as an important aspect of AML. KRA
officials confirmed the legal basis for the requirement to declare
monetary instruments and cash over USD 5,000 in value is Legal
Notice 118 of September 1998. Based on the Central Bank of Kenya
Act, the CBK previously instructed KRA Customs only to provide a
monthly record of the volume of declared cash flows. The summaries
of cross border cash declarations are sent to CBK to collate data
for statistical purposes. .Cash declaration is not part of the exit
or entry forms in Kenya, and oral requests by Customs officers about
cash from travelers are inconsistent or rare, according a KRA
representative on the Task Force who investigated current practices.
If a Customs officer discovers undeclared cash over $5,000, the
officer simply requires the traveler to declare the cash. There are
no penalties and no follow up beyond recording the amount declared.

...But Can Be Strengthened
--------------------------
3. (SBU) KRA officials said they would take immediate steps to
improve their procedures at Kenyan airports, followed later at
border crossing points. Customs Officers will ask travelers for
declarations, and signs will be posted stating the declaration
requirement. Two books will be kept to record incoming and outgoing
cash declarations separately. The names of declaring travelers and
whether they declared voluntarily will be noted for CBK and KRA's
tax collection offices to follow up on. However, addition of the
cash declaration to the exit forms will have to wait, perhaps until
after the AML bill is passed and implementing regulations completed.


AML Bill Covers Cash Couriers
-----------------------------
4. (U) The draft AML bill, called the Proceeds of Crime and
Anti-Money Laundering Bill of 2006, includes provisions to control
carrying money across borders (see para 8 for the relevant text).
Task Force officials stated that the implementing regulations will
specify the procedures for declaration and seizing suspicious money
from travelers. Two of the three senior KRA officials on the Task
Force stated they plan to attend an East and Southern Africa
Anti-Money Laundering Group (ESAAMLAG) conference on cash couriers
in Zambia the week of February 26. They also requested U.S. Customs
support for training KRA Customs Officers on implementing the
provisions in the AML bill.

DHS/CBP Program Can Assist
--------------------------
5. (SBU) Nairobi CBP officer explained how CBP's World Customs
Organization (WCO) Framework of Standards program is comprehensive.
The training for KRA Customs envisioned over the next 2-4 years may
not address cash smuggling directly, but the capacity building will
strengthen KRA Customs' ability to implement the AML laws and
regulations on cash couriers.

When Will the Bill Become Law?
-----------------------------
6. (SBU) The Task Force officials were confident the GOK would
resubmit the AML bill to Parliament when the session begins o/a
March 20, and that the bill would be one of the GOK's top
priorities. They could not guarantee Parliament would pass the
bill, especially in an election year. The Task Force Chairman
believes the Finance Committee supported the bill in general, but
had concerns about unspecified provisions. If the bill is approved
by Parliament, President Kibaki would have to sign it to become law.
See septel for further discussion of the bill and advocacy plans.

Comment
-------

7. (SBU) Task Force and KRA officials clearly understand the need
for, and support actions to tighten, their border cash courier
control regime. The demarche appears to have drawn the attention of
high-level KRA officials to the inadequacy of the current money
declaration regime at the airports. We hope Customs and CBK
implement the offered steps without waiting for the AML bill to
pass, but implementation will likely be uneven. KRA knows the
information gleaned from cash declarations could be useful in
preventing tax evasion and money laundering and therefore has an
incentive to follow through. For its part, CBK needs better
information on cash flows to manage the money supply and control
inflation. However, it will be difficult for them to ensure
effective declaration enforcement and reporting by line officers.

8. (U) Begin operative text on cash declarations from the draft
Proceeds Of Crime and Anti-Money Laundering Bill of 2006:

Chapter 2, Interpretation
"monetary instruments" means-

(a) coins and paper currency of Kenya or of a foreign country
designated as legal tender and which is customarily used and
accepted as a medium of exchange in the country of issue;

(b) travellers' cheques, personal cheques, bank cheques, money
orders, investment securities; or

(c) any other negotiable instruments that are in bearer form, or
other form through which title passes upon delivery;

Chapter 12

(1) A person intending to convey monetary instruments in excess of
the amount prescribed in the Third Schedule to or from Kenya shall,
before so doing, report the particulars concerning that conveyance
to a person authorised by the regulations for that purpose.

(2) A person authorised to receive a report made in subsection (1)
shall, without delay, send a copy of the report to the Centre.

(3) A person who wilfully fails to report the conveyance of monetary
instruments into or out of Kenya, or materially misrepresents the
amount of monetary instruments reported in accordance with the
requirements of subsection (1) commits an offence.

(4) Any monetary instrument used in a suspected violation of
subsection (3), or which an authorised officer has reasonable
grounds to suspect is tainted property, may be temporarily seized by
an authorised officer for as long as is necessary to obtain a court
order pursuant to section 65 or 79, but in any event, not later than
five days.

(5) An authorised officer making a temporary seizure under
subsection (4) shall give the person from whom the monetary
instruments are seized-

(a) a receipt specifying-

(i) the name, agency, rank of the seizing officer;
(ii) contact information for that officer and agency;
(iii) time, date and location of seizure;
(iv) description (including serial numbers) of the value of and
types of instruments seized; and

(b) a formal notice of the authorised officer's intent to initiate
forfeiture proceedings under this Act against the seized monetary
instruments.

(6) If the authorised officer fails to obtain an order pursuant to
section 65 or 79 against the temporarily seized monetary instruments
within five days from the date of seizure pursuant to subsection
(4), then the monetary instruments shall be returned forthwith to
the person from whom it was taken.

THIRD SCHEDULE S. 12
CONVEYANCE OF MONETARY INSTRUMENTS TO OR FROM KENYA

A person who transports monetary instruments of US$ 5,000 or its
equivalent in Kenya Shillings or any other currency into or out of
Kenya shall declare, in a prescribed form, at the port of entry or
exit.

End Text

RANNEBERGER

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