Weak financial laws blamed for corruption in Kenya

Kenyans have lost billions of shillings as a result of weak laws governing the country’s financial sector, a new corruption report reveals.

The Global Corruption Report, 2009, launched on Wednesday by the Transparency International Kenya Executive Director Job Ogonda, states that poor sectoral and corporate governance of the financial sector had resulted in weaknesses that make pensioners, creditors, employees and depositors “extremely vulnerable”.

“These weaknesses include ineffective laws, poor financial sector oversight, a base sector culture and overbearing political and executive corruption,” the report notes.

It singles out the move by the Capital Markets Authority to intervene in the management of stock brokerage firm Discount Securities last year by appointing an auditing firm, KPMG, to investigate allegations of a weak financial base and poor corporate governance to illustrate the poor oversight in he financial sector.

Poor retirees

“Following these developments, the National Social Security Fund (NSSF) lost, or is likely to lose, Sh1.4 billion belonging to desperately poor retirees invested through the stockbroker,” the report states.

It also cites the collapse of Euro Bank in 2003 with Sh256 million belonging to NSSF contributors as another indicator of weak laws governing the country’s financial sector. The report singles out money laundering as a major contributor to the high level corruption in Kenya.

“It rarely adds value to the country as Kenya is only a conduit of value to other locations,” the report observes. “Money laundering also entrenches political corruption as criminals fund political processes,” adds the report.