Financial Secrecy Index 2020: Ways in Which Kenya Can Address Financial Secrecy

Financial Secrecy Index

Early this year, Kenya was ranked 24th in a global financial secrecy index report 2020 conducted by Tax Justice Network Africa. The report indicated how secretive the Kenyan country is at a Global glance.

Recording a 76 score out of 100 in terms of secrecy, Kenya was the second leading country in Africa and the leading in East Africa as a highly secretive nation. The high score placed Kenya at position 24 globally on the Financial Secrecy index of 2020.

Like many other African countries, Kenya got independence over fifty years ago. However, the tax system and global financial state are still being rigged against the country’s interests. This is the reason why most African nations are still depending on foreign aid and borrowing money in the form of loans to sustain their local development.

To date, the sovereignty of African nations has been greatly affected by their governments who have undermined domestic revenue mobilization that is needed for public spending and investments.

The Panama Papers

Publications, like the Paradise Papers, Panama Papers, and Luanda Leaks, revealed how many former sovereign powers and their colonies helped each other in hiding illicit financial flows from the continent. These IFFs leave our continent and flow back as remittances and loans from overseas and yet it is the same money taxed from our pockets.

In 2016, the Panama Papers cited many Kenyans secretly hiding their wealth in foreign countries or as they say, jurisdictions, with a leading number of politicians.

According to a study done by Oxfam Kenya, less than 0.1% of the population in Kenya owns more wealth than the bottom 99.9%. And wait, if you ask yourself who these people are, you may end up hearing the same few names that are known. However, truth is Kenya has a huge margin between the poor and the rich.

ALSO READ: Strategies to help prevent Illicit Financial Flows in Africa

Not inquiring even where their wealth is invested you cannot fail to notice the increasing disparity in Kenya. In the recent publication of the paradise papers, a former minister was named as owning London based assets that were invested through a Mauritius based company.

With all this information, there are ways in which Kenya can address financial secrecy:

Enforce Automatic Exchange of Information

Financial secrecy happens when there is a refusal to share financial information with legitimate authorities such as tax authorities and police authorities. As international standards demand, Kenya government can sign the Multilateral Competent Authority Agreement to be able to engage in the automatic exchange of information pursuant to the OECD’s common reporting standard. This will effectively enable the exchange information with other jurisdictions and assist developing countries.

Registration of Beneficial Owners

This move will ensure there is compliance with the law. This will enable transparency in tracking corruption and money-laundering activities.

Disclosure to Support Accountability

Kenya would approach the issue of financial secrecy through disclosure to support accountability and compliance in the corporate world. Furthermore, transparency is critical to the corporate world because it allows councils of directors to assess management’s effectiveness and to take early curative steps, when necessary, to address the rotting in the financial status of companies.

By addressing the issue of financial secrecy, Kenya will be able to raise enough tax to meet the basic needs of our society without burdening low-income earners.