Nairobi is named among top cities whose real estate sector is exceedingly used for laundering proceeds from graft and international financial flows. The amount of illicit money entering Kenya from shady business activities, corruption, crime and faulty trade invoicing has increased more than five-fold in a decade to equal about 8 per cent of Kenya’s economy. In recent years the pace of dirty money inflows has been accelerating in the region. 


Nairobi is included among top locations in the report by The Sentry, an investigative and policy team that investigates the dirty money connected to African war criminals and transnational war profiteers. Corrupt individuals who launder illicit cash in secret offshore accounts are opting for real estate to hide their loot. This is increasingly becoming popular in cities like Nairobi, Cape Town, Windhoek, Johannesburg and Kampala which present a chance for corrupt individuals to exploit the sector. Loopholes in the real estate sector are evident as governments, banks, regional and international organizations have not yet prioritized the fight on such activities. 


Authorities in Kenya, among other countries, have not done much to address risks in the real estate sector that is vulnerable to money laundering. A report by The Global Financial Integrity indicated that $16.2 billion (Ksh1.5 trillion) flowed into Kenya through trade miss-pricing and money that was not officially counted in its balance of payment reports. Money laundering in the property market sector occurs mostly in cash-based economies where there is no regulated price market and no specific property acquisition requirements.  


The flow of illicit money in real estate has become a more lucrative and prestigious investment. Kenya is quite vulnerable due to a high volume of cash-based transactions, lack of an adequate legal framework and the existence of alternative remittance avenues. An evaluation by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), noted the lack of enforcement of 2011 anti-money laundering legislation that requires real estate agents to report suspicious reports, as a challenge in Kenya. 


The National Treasury CS, on March 22, 2019, appointed a task force to conduct a ‘National Risk Assessment on Money Laundering and Terrorism financing’ which is expected to be complete by December this year. The taskforce on the National Risk Assessment consists of the National Treasury and Planning, FRC, Central Bank of Kenya, Asset Recovery Agency, Kenya Revenue Authority and Kenya Bankers Association. 


The East African Association of Anti-Corruption Authorities has asked the World Bank Institute to study how money from crime and corruption washes through Kenya, as financial regulators are concerned about the illicit flows in the country. Financial Institutions, law enforcement, regulators and the government should address the systemic issues that contribute to illicit financial flows through real estate. They should also monitor accounts for red flags related to real estate transactions and enhance due diligence standards. Reporting requirements to improve the quality and consistency of information available to banks, regulators and law enforcement. Is also required. The implementation of policies and regulations are important in curbing illicit cash in the property market.