The government must compel companies to display the names of their real owners if it seeks to limit corruption in public sector contracts estimated to cost the country $6 billion annually (close to Sh870 billion).
In its policy brief dubbed 'Combating Contemporary Kleptocracy: State of Play in Kenya', the Institute of Economic Affairs (IEA) says although the state has introduced groundbreaking law that forces companies to disclose their “human” owners, the information is not accessible to the public.
"This information in the public domain not only helps to link the real owners of businesses to their gains but also allows for members of the public to become watchdogs in order to whistleblow on any corrupt practices,'' the institute says in brief presented to the editor in Nairobi yesterday.
It now calls for fast-tracking of amendment to the Companies Act 2015 to give the Business Registration Service (BRS) teeth to deal with firms hiding beneficial owners.
"If approved, the law will give the BRS wider powers to sanction entities that hide real owners while pocketing billions of shillings from public contracts,'' IEA says.
On 5 July 2019, Kenya’s Statute Law (Miscellaneous Amendments) Act, 2019, made amendments to the Companies Act, 2015, by introducing Section 93 A, which requires every company registered in Kenya to prepare and keep a register of its beneficial owners.
This register discloses the personal information of the beneficial owners of a company, the nature of ownership or control they have in the company and the date they became or ceased to become beneficial owners.
It further provides that a copy of the beneficial owners’ register is to be filed with the Registrar of Companies within 30 days of its preparation or within 14 days following an amendment to the same.
The report says that disclosing beneficial owners will also help in curbing money laundering and shine a light on investors using nominee accounts to side-step ownership limits in firms listed on the NSE.
The current law limits the range of sanctions that the agency can impose, with an offending company liable to a fine not exceeding Sh500,000.
This most probably explains the low compliance whereby only 1,476 contracts worth Sh77.9 billion had beneficial information published on the Public Procurement Information Portal.
The gaps in beneficial ownership have seen the country ranked among the most secretive in the world by the Tax Justice Network in the past three years.
The Financial Secrecy Index ranks jurisdictions most complicit in helping individuals hide their finances from the rule of law.
The 2022 index shows that although Kenya's level of financial secrecy dropped to 67 per cent from 76 per cent in 2020, its supply to the global potion rose to 0.83 per cent compared to 0.80 per cent three years ago.
Kenya is ranked third in Africa after Angola which has since outpaced Algeria which ranked second.
The country has been ranked the second most rigid in Africa after Algeria and among the top 30 in the world in the latest Financial Secrecy Index of 2020.
The score means that the country is a fertile market to stash ill-gotten private financial wealth and other illicit financial flows (IFFs).
The country's rate is, however, below 75 per cent, meaning it is highly secretive from exponentially secretive in 2020.
){kind=link}
