Kenya signs new global anti-corruption deal

Taxpayers and graft victims could receive compensation for monies lost after Kenya became a signatory to a global anti-corruption agreement.

The agreement followed last week’s first ever global declaration against corruption made by 47 participant states at the close of the UK’s Anti-Corruption Summit.

The agreement, contained in a policy paper, has three broad resolutions, with specific country commitments. These include exposing corruption by pursuing and punishing the corrupt, and fully supporting those who have suffered from corruption.

“Compensation payments and financial settlements, in countries whose legal systems and domestic policies accommodate these, can be an important method to support those who have suffered from corruption,” reads the policy in part.

“Those countries that accommodate such payments will work to develop principles to ensure that such payments are made safely, fairly and in a transparent manner to the countries affected.”

Panama papers

The new pact came three days after the International Centre for Investigative Journalists (ICIJ) released the second tranche of leaked Panama Papers, linking business people and politicians to companies in tax havens.

“The Panama Papers left virtually no country unscathed,” said Porter McConnell, the director of the Financial Transparency Coalition (FTC).

“The data showed that a shadow financial system is available to the rich and powerful worldwide, and individuals from rich and poor countries alike turned up in the documents.”

All the countries in the summit last week made individual commitments to end corruption within their jurisdictions in what has been cited as one of the first big moves towards ending trans-national illicit trade.

“More governments are waking up to calls from their citizens, who are no longer willing to put up with the inequality made possible by financial secrecy,” said Koen Roovers, the lead European Union advocate for the FTC.

“Public registers of the true owners of companies would help detect and deter corruption and tax abuse, and restore trust in the global financial system.”

Kenya, which was represented at last week’s convention by Attorney General Githu Muigai, further made the commitment to establish public company registries and make available access to information required by partner countries to track down and repatriate proceeds of corruption.

“Kenya commits to ensuring that international and domestic law enforcement agencies have full and effective access to beneficial ownership information for companies and other legal entities registered within its jurisdiction,” said Prof Muigai.

Kenya has had more than its fair share of mega-corruption scandals in both the private and public sectors, with billions of shillings siphoned out of the country in a variety of schemes and dubious deals.

The new pact is of special interest to the victims of the 2006-07 multi-billion-shilling pyramid scams that saw thousands of Kenyans lose their hard-earned money.

Some of the money has been reportedly traced to offshore accounts through the leaked papers, and could thus be subject to the new asset-recovery agreement signed last week.

Doping allegations

Muigai further revealed that Kenya has made other commitments to directly address the country’s tainted sporting image brought about by allegations of doping by some athletes.

“As a proud sporting nation, we have seen the infiltration of rogue agents and other practitioners whose unsavoury conduct and unfettered greed has impacted upon our athletes and threatened to dent our long-standing reputation,” he said.

“Kenya welcomes the proposal to strengthen openness and improved governance in this sector, and we call for an expansion of the standards and sanctions to sports agents and health.”

Ironically, at about the same time the AG was giving Kenya’s submissions on its commitment to the new anti-corruption drive, the country was failing an integrity test.

The International Association of Athletics Federations (IAAF) on Friday issued a statement revealing Kenya would remain on a monitoring list of countries with doping problems until the end of the year.

This follows the World Anti-Doping Agency (Wada) declaring Kenya’s drug-testing agency non-compliant to conditions laid down to weed out doping, despite two deadline extensions.

This puts the country’s participation in the Rio Olympics later this year in jeopardy should a ban be declared on this basis.

Political will

The country’s failure to meet the Wada deadlines has cast doubt on policy makers’ ability to follow through with bilateral commitments that have significant political and economic implications.

This would mean the new commitments the country has made, such as enhancing mechanisms for implementation of Open Governance initiatives, will remain theory, having no lasting impact on corruption and fraud.

According to Alvin Mosioma, the executive director of the Tax Justice Network, the country lacks the political commitment to clamp down on big corruption, such as tax evasion executed by multinationals and high net worth individuals.

“There is no political will to enforce laws against illicit financial flows because of the amount of money involved, which makes it easy to compromise law enforcement officials and regulators,” he said.

Mr Mosioma added that the need to clean up the country’s companies registry has been a pressing concern for years, yet little headway has been made to date.

The issue of corporate governance has come to the centre of the country’s business agenda the last few months, following reports of corporate mis-deeds at the top level of several public and private corporations.

According to Capital Markets Authority CEO Paul Muthaura, Kenya has the institutions and legislative capacity to act on fraud.

“We must be conscious that the avenues to tackle fraud and risk cannot be limited to only revisions of the law and regulations, but go to the fundamental perception of risk, and the operation and internal structures put in place to influence culture and behaviour,” he said.

Mr Muthaura added that the country needs to firm up corporate surveillance and tighten the regulation of financial systems as new products are rolled out.

The recent launch of Real Estate Investment Trusts (Reits), and the planned introduction of derivatives trading and Exchange Traded Funds present opportunities for financial inclusion, but also risks to the stability of financial systems, he cautioned.

fsunday@standardmedia.co.ke