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State starts tracking bets in illicit cash crackdown

13th November, 08:57

Betting companies are now required to report suspicious bets and punters to the government in the latest drive to combat money laundering and flow of illicit money.

The firms must report transactions above Sh1 million ($10,000) or suspicious bets to the Betting Control and Licensing Board (BCLB).

The reporting obligations were attached to the annual betting licences granted from July 1 and come amid increased concerns that betting firms are emerging as a vehicle to launder proceeds of crime and corruption, the so-called dirty money.

The betting companies now join the growing list of non-financial institutions like casinos, real estate agencies and consulting accounting firms that are required to report suspect transactions.

However, the law does not require betting firms to report the suspect transactions to the Financial Reporting Centre (FRC) -- which is mandated to track illicit cash.

Punters dealing in large transactions, those putting money in their betting wallets and staking a small fraction of it as well as those making small, regular and suspicious bets are now in the radar of Central Bank of Kenya (CBK).

"We are now expected to report suspicious transactions to the board. The reporting obligation is part of the new licences issued from July," said the CE0 of a betting firm who requested not to be named, fearing reprisals from the State.

Online sports betting companies had grown rapidly in recent years, riding a wave of enthusiasm for sports, before the government started a crackdown on their operations.

Licences of more than 15 betting firms were not renewed, especially due to fresh demands for taxes, triggering court fights with firms like SportPesa and Betin.

The government reckons the rapid growth had seen the gaming industry achieve a combined revenue of Sh204 billion, offering a perfect market for criminals seeking to launder dirty money.

Executives of betting firms reckon that criminals can feed their illicit money into their betting wallets, bet a small share of the cash before cashing out with vast majority of the cash.

"That's what turns dirty money clean," said the CEO of the betting firm, adding that a number of suspect accounts have been frozen and details forwarded to the BCLB.

Before the tax crackdown that has seen firms like SportPesa and Betin close shop, the State had introduced new gambling regulations, including banning advertising outdoors and on social media.

This came after the Interior minister had highlighted how gambling had become a problem for the young and poor.

Under the rules, any gambling advertising will need approval from the regulator and will be required to contain a warning message that must constitute a third of the actual advertisement.

Gambling in Kenya generally takes place online.

The gaming companies largely relied on Safaricom's network to take bets, communicate with users and process payments through paybills.

The government in July ordered Safaricom to stop processing payments for sports betting companies, effectively grounding their operations.

The order for betting firms to report suspect transactions comes in a period when the State is looking add more businesses and professions to the list of entities with reporting obligations.

Lawyers, employees of accounting firms and trusts holding assets for wealthy people will be required to report suspicious trades and transactions to the FRC once fresh changes to the law are brought to Parliament.

Trustees have been included in the list amid suspicion that Trusts are becoming the choice vehicles for laundering proceeds of crime and corruption.

Owners of accounting firms are covered in the current law, but the amendments will see their employees now expected to report to the FRC.

Lawyers are targeted in property transactions, bank accounts management, company acquisitions and set up of start-ups.

Advocates have recently emerged as the weakest link in the fight against money laundering 'by using bank accounts for depositing clients cash as shield to reporting to FCC.

Kenya has been fingered for illicit money entering the country from crime, drugs, corruption and shady business activities, illustrated by homes in leafy suburbs and luxury cars.