Kenya Terrorist Finance: Illicit Cash Couriers

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