Money laundering and real estate sector in Kenya: towards robust regulation
Date
2022
Authors
Ssekubwa, Rogers Githinji
Journal Title
Journal ISSN
Volume Title
Publisher
Strathmore University
Abstract
The problem this study seeks to address is how the failure to impose money-laundering reporting obligations on all non-financial actors who play a critical role in land transactions where the real estate sector falls is linked to the promotion of money laundering in Kenya. With the over-regulated financial system, smart money launderers move to the underregulate real estate sector with many unregulated actors. Laundering money through real estate has led to negative consequences such as increased prices, destabilisation of the property market, and, most importantly, providing a safe investment for criminals. The legal regime on anti-money laundering and land laws does not explicitly address money laundering through real estate. The existing gaps can be exploited to invest dirty money into real estate. This study is done through a doctrinal research methodology to investigate the research problem. The study takes land laws, POCAMLA, Anti-Corruption and Economic Crimes Act as a case study. A review of the gaps in land laws generates new insights and informs the formulation of regulations for safeguarding Kenya's real estate sector against money laundering. The study also looks at best practices in jurisdictions such as the United States of America (USA) and South Africa (SA) to draw lessons on how to address money laundering through the real estate sector. The lessons drawn from these two jurisdictions are intended to inform the formulation of robust, sector-specific legislation to curb money laundering through real estate based on Kenya's local context. This research poses and investigates three questions to achieve its overarching purpose. First, in answering the questions on the difficulties of using the current land laws and anti-money laundering regulatory framework, the study establishes that the laws are not specific to addressing money laundering through Kenya's real estate. As a result, they are ineffective in solving the problem. This inefficiency originates from challenges arising from the non-inclusion of all non-financial actors as reporting agents. Furthermore, there is a disconnect between land laws and anti-money laundering regulations when addressing money laundering, specifically in real estate. The research shows that there are no robust safeguards to anticipate and lock out money laundering activities from the onset of a conveyancing transaction to the completion stage, during which the title is registered in favour of a purchaser. A specific anti-money laundering regime for real estate transactions would be effective because it will enable the implementation of context-specific and appropriate strategies for the real estate sector. The study further concentrates on measures to curb money laundering through real estate in the USA and South Africa. The findings have important implications for the general understanding of the effectiveness of Kenya's anti-money laundering regime in dealing with real estate money laundering. Additionally, other East African countries with similar legislation to Kenya could from seeing the weaknesses identified in the Kenyan regime and the possible solutions they may borrow from.
Description
A Thesis submitted in partial fulfillment of the requirements of the Degree of Master of Laws, at Strathmore University
Keywords
Money laundering, Real estate sector_Kenya, Regulation