General AML FAQs

General AML FAQs
Q What is Money Laundering?
Q How does Money Laundering occur?
Q What are the Money Laundering regulations?
Q What businesses are subject to the Money Laundering Regulations?
Q How much money is laundered each year?
Q How does Money Laundering affect me?
What is Money Laundering?

Money Laundering is the processing of criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to enjoy financial profits without jeopardising their source. These sources might be illegal arms sales, smuggling, and the activities of organised crime such as drug trafficking and prostitution rings, which are each capable of generating huge amounts of money. The desire to benefit from these huge amounts of money is the real incentive to “legitimise” the ill-gotten gains through Money Laundering.

When a criminal activity generates profits, the individual or group involved must find a way to control the funds without drawing attention to how the activities that generate the money or the persons involved occur. Criminals do this by disguising the sources, changing the form, or moving the funds to a place where they are less likely to attract attention – in short, Money Laundering!

How does Money Laundering occur?
Money Laundering can be broken up into three stages. The first stage of the Money Laundering process is ‘placement’, which refers to the criminal depositing or investing the financial proceeds of crime into a bank, business or other asset. The second stage of the Money Laundering process is ‘layering’. This usually involves the criminal engaging in a number of financial transactions to complicate the audit trail. The third and final stage of the process is ‘integration’ and this involves the criminal removing money from the financial system and using the now ‘clean’ money for everyday consumption.
What are Money Laundering regulations?
This refers to the policy framework that provides details of systems and controls that regulated businesses must have in place to comply with Anti-Money Laundering and counter terrorist financing legislation and regulations.
In Kenya, we are governed by the Proceeds of Crime and Anti-Money Laundering Act of 2009. Safaricom has taken proactive measures to comply with the Act as well as international best practice.

What businesses are subject to Money Laundering regulations?

Businesses that are regulated by the Money Laundering regulations are called ‘regulated businesses’. These include: estate agents, casinos, insolvency practitioners, tax advisers, accountants and auditors, certain legal professionals (dealing with finances or property), and high value dealers. It also includes banks, credit institutions, money lenders, foreign exchange bureaus and corporate finance advisers.

In Kenya, Safaricom is covered by the Proceeds of Crime and Anti-Money Laundering Act 2009 which applies to “financial institutions” whose definition in the Act includes “any entity which conducts as a business…… issuing and managing means of payment (such as….electronic money)”

How much money is laundered each year?
Because Money Laundering is so difficult to detect, knowing how much money is involved on an annual basis is next to impossible. Some estimates have been made however:

For example, FATF, citing the International Monetary Fund (IMF), states that in 1996 the total value of Money Laundering in the world could have been somewhere between two and five percent of the world’s gross domestic product (gdp).

Using 1996 statistics, these percentages would indicate that money laundering ranged between US$590 billion and US$1.5 trillion. To put this into perspective, the smaller figure is roughly equivalent to the value of the total output of an economy the size of Turkey.

How does Money Laundering affect me?
Money Laundering is a vital part of the operations of many of society's most anti-social and harmful individuals and organisations. Drug dealers, people traffickers, burglars, fraudsters, robbers, illegal arms dealers and smugglers are among those who use the financial system to launder money. If we make Money Laundering more difficult, then we are making it tougher for criminals to succeed and prosper, which can only be a benefit to society. There are also significant economic benefits to preventing money laundering.

In Safaricom if we don’t prohibit the use of M-PESA for money laundering, it may lead to penalties for both the company and individual staff members; this in turn can lead to loss of jobs due to the financial implications that the cash penalties will have not to mention the bad publicity the company would have to deal with.