Kenya's construction boom cloaks a growing criminal activity

President Uhuru Kenyatta commissions the construction of Kenya’s next tallest building G47 Ugatuzi Towers in Nairobi’s Hurlingham area ©provided by Business Insider Africa

A new report reveals that money laundering in Kenya is most prevalent in the construction industry. The reports showed that over 50% of the cases of money laundering reported were linked to the country’s construction sector. Other crimes such as tax evasion, sanctions evasion, corruption, asset protection from seizure, funding of terrorism, and proliferation have also been tied to the industry.

・Kenya’s construction sector emerges as the prime hotspot for money laundering, with over 50% of reported cases linked to the industry.

・Private limited companies are the primary legal structures abused for money laundering.

・Despite its pivotal role in economic growth, the construction boom in Kenya serves as a cover for various illicit activities.

Kenya’s construction sector as a consequence of its rapid growth has found itself dealing with a growing pain in the form of money laundering. Approximately 56.5% of private companies implicated in money laundering were in the construction industry.

This is according to The National Risk Assessment On Money Laundering and Terrorism Financing of Legal Persons and Legal Arrangements – Kenya report, as seen in an East African report. It was revealed that in 2022 there were reports of money laundering from 10,733 private entities that were registered.

“The legal structures that had been abused for money laundering purposes were mostly involved in construction, real estate, manufacturing, and financial services,” said the report.

With a contribution of 7.1% to the GDP of the East African country, the construction sector in Kenya stands as one of the fastest growing.

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This is a result of the infrastructure overhaul going on in several regions including projects like the Nairobi Expressway, the Standard Gauge Railway, the Lamu Port, construction and rehabilitation of roads as well as thousands of commercial and residential buildings.

As a result, the industry is used by individuals to commit crimes such as money laundering, tax evasion, sanctions evasion, corruption, asset protection from seizure, funding of terrorism and proliferation, and other offenses.

“Review of the enforcement data shows that Private Limited Companies were the most frequently abused legal structure for money laundering purposes in Kenya in comparison to other legal structures,” said the report.

By December 2022, there were 690,222 private firms registered in Kenya, of which 395 had been recorded in connection with events involving the funding of terrorism, and 10,733 had been reported concerning money laundering, according to BRS.

“Private limited companies (98.09 percent) were the highest legal structures associated with money laundering. Further, out of the 98.09 percent cases involving private limited companies, 43.51 percent of the cases involved abuse by directors of the company, employees were also involved to a great extent,” as seen in the report.