4 | NEWSFOCUS November 20, 2018 www.mygov.go.ke Kenya spearheads Africa financial crime training Training of 24 staff from different government agencies in Kenya and agencies of other countries in Africa conducted in Nairobi BY BOAZ KIPNGENOH H eadlines of highly sophisticated economic crimes ranging from tax evasion, secret offshore financial dealings and other forms of illicit financial flows are the norm across international and local media. Over 13.4 million leaked documents dubbed Paradise papers and another 11.5 million documents (Panama Papers) are examples of the shady offshore deals. The reports uncovered individuals and multinational corporations hiding assets in what is referred to as ‘artificial structures’. Tax evasion, money laundering, bribery and corruption have been cited as the major obstacles for developing countries to mobilise domestic resources to finance development in a sustainable way. A company may legitimately move offshore for the purpose of tax avoidance or to enjoy relaxed regulations. Offshore financial institutions can also be used for illicit purposes such as money laundering and tax evasion. US economist Gabriel Zucman told press in April 2016 that 8% of the world’s wealth – a vast $7.6tn (Sh760 tn) – was stashed in tax havens. Zucman had estimated the loss in global tax revenues at $200bn (Sh20tn) per year. That included $35bn (Sh3.5tn) in the US and $78bn (Sh7.8tn) in Europe. Losses due to illicit financial flows in Africa are estimated to be over US $50 billion per year, according to 2015 Mbeki report. Reportedly, when one country offers tailored tax deals to multinationals and another keeps the wealth of corrupt elites out of sight in its coffers, they steal the revenue of other nations. Globally, money laundering is used to finance terrorism and curbing this vice requires multiagency approach. However, global cooperation to fight tax evasion and avoidance has grown rapidly over the past few years. Apart from capacity building of financial crimes investigators, according to Organisation for Economic Cooperation and Development (OECD), tax transparency and exchange of Information between tax authorities on financial assets and activities of their taxpayers abroad has proved to be a valuable tool in this fight. The commencement of the training of 24 staff from different government agencies in Kenya and agencies of other countries in Africa last Monday in Nairobi brings the number of trained financial crimes investigators to at least 80 in the last 15 months. The training seeks to equip participants with key modern skills required to ensure successful asset recovery. This includes the ability to trace transactions through complex financial arrangements and use of sophisticated techniques to identify links between suspects and illicit financial activities and the assets acquired from these activities. The eight-days training programme on Asset Recovery: Freezing and Seizing Assets which ends tomorrow at the Kenya School of Monetary Studies in Nairobi, is the 3rd training to be held under the auspices of the Organisation for Economic Co-operation and Development (OECD) Africa Academy for Tax and Financial Crime Investigation. OECD has trained over 250 investigators since it was started in 2013 in Oslo, Italy. OECD has partnered with the Kenya Revenue AuthorRecovering the proceeds of crime, be that tax crime, money laundering, bribery and corruption or any other form of criminally has to be a central theme to any investigation - Mr. John Osborn ity (KRA) to host the trainings which held the first pilot programme in June 2017. The pilot programme is in line with capacity building framework approved by the East Africa Revenue Authority Commissioners of Tax Investigations (EARACTI). Other partners in the programme are the Federal Ministry for Economic Co-operation and Development of the Federal Republic of Germany, the German Corporation for International Cooperation (GIZ) and Italian Ministry of Economy and Finance. Kenyan delegates were drawn from various agencies led by KRA, Ethics and Anti-Corruption Commission (EACC), Ministry of Interior and National Coordination, National Intelligence Service, Office of the Director of Public Prosecutions (ODPP), Assets and Recovery Agency, Financial Reporting Centre and Central Bank of Kenya (CBK). Capacity building framework, according to the EARACTI, entails training of investigators in the region and the curriculum comprises of intelligence gathering, investigation techniques, and financial and economic crime investigations. The training is run in modular format, which will also include international taxation and transfer pricing, tax fraud in specialised sectors such as extractive (mining) industry telecommunications as well as betting and lottery. At the regional level, the network of tax investigators within east Africa is progressing well in forging cross border cooperation, thereby making it harder for tax evaders to find solace within East African Community States. Speaking during the commencement on-going training at the KSMS, the OECD representative Mr. John Osborn said the course on Asset Recover Speciality Course was developed as a result of comments made by participants on the OECD Foundation and Intermediate course where the need for specific awareness was raised to build capability to recover assets from criminals who have abused the system. Mr. Osborn said assets recovery is not just criminal sanctions but also asset denial using civic powers. “Career criminals have in the past viewed a custodial sentence as an occupational hazard. Whilst in prison they were safe in the knowledge their illicit gains would be available to them on their release from prison or indeed be available to family members to enjoy during their incarceration. Recovering the proceeds of crime, be that tax crime, money laundering, bribery and corruption or any other form of criminally has to be a central theme to any investigation. All governments now want to see the return of the money stolen from them,” added Mr. Osborn. The vision of the OECD Africa Academy for Tax and Financial Crimes Investigations and which is in line with the G20 Africa Focus and the G7 Bari Declaration, according to the OECD official, is to provide demand-driven training addressing the specific needs of African countries and building on Africa-wide experiences and best practices in tackling illicit flows. The trainings are facilitated by an international faculty of senior and experienced tax and other financial crime investigators drawn from various countries. In the recent training facilitators came from the United Kingdom, Italy, Germany and Portugal. According to KRA Commissioner of Intelligence and Investigation Mr. James Mburu, the participants are experts in tax and financial crime investigators, prosecutors, financial analysts, and judicial officers. The course, he said, will also enable investigators to have an increased awareness of current risks and trends in asset recovery including conviction based and non-conviction based confiscation, prosecution challenges and best practices among other skills. “The course is an important platform to provide a good understanding of the significance of effective cooperation among the agencies and countries represented in combating tax and financial crimes,” Mr. Mburu said. As part of its strategy to enhance capacity to address tax and other ecoPercentage of the world’s wealth – a vast $7.6tn (Sh760 tn) – that is stashed in tax havens. The estimated loss in global tax revenues is $200bn (Sh20tn) per year 8% nomic crimes investigations, KRA highly considered capacity building effort and creation of a fully-fledged and broad based intelligence management function whose mandate include the creation of robust frameworks to collect, process and monitor the use of intelligence information. Effective intelligence collection is a key factor in achieving successful interdiction of tax crimes. This has seen KRA prosecute 508 cases related to tax evasion and recovered 10.7 billion from 2016/17 FY to date. The function will have a broad based mandate covering intelligence collection on tax evasion, cybercrime threats, and corruption amongst our staff in addition to scoping other risks that may impact institutional ability to deliver our mandate. Unlike before when KRA depended on volunteers to supply intelligence, it has embarked on a programme to actively source intelligence to support tax enforcement. This entails investment in conventional intelligence collection resources including people and technology to undertake conventional surveillance operations and penetrate tax evasion cartels. Prioritised use of technology in the fight against tax crime is based on conviction that string detection capacity helps significantly in reducing the incidence of tax crime. Tax digitisation programme will greatly help interdict tax crimes by significantly enhancing the risks of detection. The taxman recruited intelligence collection personnel to strengthen investigation capacity through the professionalization of our investigation teams in addition to continued collaboration with other national and international agencies involved in similar crime interdiction programmes for purpose of capacity building and information sharing. Previously, most of KRA’s investigators came from tax audit backgrounds and were therefore in essence tax auditors. Since 2005, however, KRA determined that tax crime investigations demanded skills of a nature different from what tax auditors required. The recruitment targeted staff with right backgrounds both in crime investigation and tax administration. The programme is a broad based covering all aspects of operations from domestic tax to Customs where a full array of solutions covering cargo declaration, cargo inspection and scanning and the tracking of transit cargo. All these initiatives are reinforced by focused implementation of training programmes geared towards re-orienting staff towards risk based, evidence based enforcement interventions.
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