An Assessment Of The Effectiveness Of The Financial Reporting Centre And Financial Institutions In Prevention Of Money Laundering: A Case Study Of Nairobi County
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Date
2018Author
Kathuli, Thomas Muli
Type
ThesisLanguage
enMetadata
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The control of money laundering has not been successful despite the enactment of
POCAMLA and other laws. Money laundering damages the stability of financial sectors
and places significant costs on the economy leading to erosion of public confidence in the
financial system and the legal order. The Financial Reporting Centre is the leading
government agency mandated to combat money laundering in collaboration with
registered financial institutions, law enforcement agencies and foreign FIUs. This study
aimed at examining factors that affect FRC and financial institutions in prevention of
money laundering in Kenya. These included causes of Money Laundering, the main
actors in Money Laundering, extent to which the FRC and Financial Institutions have
succeeded in combating Money Laundering and the underlying obstacles to the
prevention of Money Laundering in Kenya. This study utilised Rational Choice Theory,
Routine Activity Theory and Deviance Theory (Strain Theory) to explain the relationship
between the dependent and independent variables. The site for the study was FRC and
financial institutions. Eighty (80) respondents were selected by stratified random
sampling from FRC, and financial institutions namely commercial banks, Forex Bureaus
and Money Transfer outlets. Seven (7) key informants from FRC, financial institutions
and law enforcement agencies were purposefully selected. Questionnaires and a key
informant guide were used to collect data from the respondents which were analyzed
using SPSS computer package and content analysis. The findings of the study reveal that
factors that lead to the prevalence of money laundering are technological innovation,
globalization, inadequate training, inefficiencies in coordination among stakeholders,
improvements in communications, poor statistics and information imbalance and spread
of international banks. The actors in money laundering include criminals of the predicate
offences, professional advisors, financial institutions and regulators. Other actors are
commercial banks, money remittances providers and insurance companies, law
enforcement officers, micro finance institutions and telecommunication companies and
mortgage finance companies and investment banks. The study found that FRC has
succeeded in combating money laundering due to interventions by FRC and by other
institutions. The underlying obstacles to the prevention of money laundering were found
to be failure to enforce the money laundering rules and regulations, inefficiencies in
coordination and inadequate training in anti-money laundering. Others are poor statistics
and information imbalance, poor communications and inferior technological knowledge
or skills. The study recommends that Government should strengthen AML legislation by
giving clarity in the definition of money laundering under section 3 of POCAMLA. Other
sections to be given clarity are section 4 on knowledge of property and section 8 on
tipping off and reconsideration of the reporting threshold of USD 10,000. Government
should ensure that there are adequate AML controls and encourage courts to impose stiff
sentences. Government should also provide enforcement agencies with adequate training
in anti money laundering to increase their capacity and put more effort in tackling illicit
money flows. The study recommends further research in the role of other law
enforcement agencies in order to get a true and broad picture of the issue.
Publisher
University of Nairobi
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Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
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