Technical and legal loopholes in Kenya’s mining industry could be fuelling possible illicit financial flows, denying the country the chance to fully benefit from its abundant minerals, a new report by The Global Finance Integrity (GFI) says.
- The industry has potential to contribute 4 per cent to 10 per cent of the country’s gross domestic product but it contributes less than 1 per cent of the country’s GDP.
- The report offers an analysis of Kenya’s corporate income taxes, mining royalties, and other mining taxes, providing insight into the complex dynamics and possible risks of illicit financial flows (IFFs) within the sector.
- According to GFI findings, Kenya is confronted with technological challenges, resistance to reform and inconsistencies in legal framework making it harder to identify natural individuals who own, control or profit from the mining companies.
“Illicit financial flows present a serious threat to economic stability and growth in Kenya. By addressing the gaps and challenges in the mining sector’s policy and regulatory framework, particularly regarding beneficial ownership, we can help safeguard Kenya’s resources and ensure that the benefits of the mining industry are felt by all,” said Philip Nyakundi, Policy Director Africa at GFI.
The Global Finance Integrity (GFI) report titled “Illicit Financial Flows Risks Related to Beneficial Ownership in the Mining Sector in Kenya” examines the regulatory and legal framework governing the minerals industry and offers an in-depth exploration of the challenges and gaps in implementing and enforcing beneficial ownership in the country.
GFI says Kenya lacks sufficient data security, verification, and quality control systems. The country also lacks publicly searchable, free, and open beneficial ownership records.
“While Kenya has made progress towards Beneficial Ownership Transparency (BOT) including key policy and legal reforms and establishment of a central register, it continues to be faced by several obstacles and deficiencies in executing and upholding BOT including the absence of efficient systems for keeping track of and assessing how the laws on beneficial ownership and Illicit Financial Flows (IFFs) are being implemented and enforced, as well as for guaranteeing accountability and compliance,” the report notes.
Other gaps in the report revolve around difficulties in confirming the timeliness and accuracy of beneficial ownership information provided by legal entities and arrangements, particularly when those involve intricate and varied legal structures and arrangements like partnerships, trusts, and foundations that can hide beneficial ownership.
