Kenya finds $71 mln in suspect cash as it retires old notes -cenbank

A Kenyan anti-corruption drive uncovered the equivalent of tens of millions of dollars in unexplained wealth when it retired old banknotes, the central bank said on Wednesday, adding much of the cash appeared to have been gained in "the criminal area".

The East African nation has a diverse, fast-growing economy, but foreign investors have long complained of widespread graft and weak application of anti-money laundering laws. On June 1, the central bank set a Sept. 30 deadline for everyone to convert their old 1,000 shillings note, worth about $10, into new ones after it became the banknote of choice for criminals of all types in the East Africa region.

Those exchanging large amounts were required to explain how they acquired the cash. The move was designed to stop the flow of proceeds of crime, like corruption and counterfeiting of banknotes, through the financial sector. Bank governor Patrick Njoroge said notes worth 7.4 billion shillings ($71.29 million) were not exchanged, rendering the cash invalid and hitting the suspected corrupt owners hard.

"These are people for the most part that maybe had some concerns in terms of going through the checks," he told a news conference. The money is equivalent to a quarter of the annual budget of the government's top hospitals in the country, Njoroge said.

It also marks the first time in the country that the corrupt have been made to lose a huge chunk of their wealth, with the biggest ever corruption fine handed out by the courts standing at 52 million shillings, he added. Commercial banks, who processed amounts up to five million shillings, flagged some 3,172 transactions as suspicious and reported them to the authorities during the conversion exercise over the four months.

Njoroge said that information will be used by other investigative agencies, including the tax authority, to uncover more cases of handling of proceeds of crime. "You have those that didn't want to pay taxes and were working in the sort of criminal area. Those, to begin with, have just been taxed the full value of their wealth," he said.

Very large amounts above five million had to be converted at the central bank. The process of invalidating the old notes, known as demonetization, had not resulted in inflationary pressure or weakening of the foreign exchange rate, Njoroge said.

In 2016, India abruptly scrapped high-value currency notes, throwing its cash-based economy into a crisis. Njoroge said Kenya had learned lessons from the chaos in India and that's why there was a four-month window. The effort to stamp out corruption will be sustained, Njoroge said.

"It cannot be that we glorify people who are involved in crime. It cannot be," he said. 

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)