Exposed: International money laundering syndicate in Nairobi

A suspected international money laundering syndicate involving Chinese nationals has been operating in Nairobi targeting businesses out to make a quick buck, weeks of investigation by the Sunday Nation reveals.

The scam involves credit cards believed to have been stolen or cloned from leading companies in China.

How it operates is simple: A Chinese lands into the country with multiple credit cards belonging to one or several leading companies operating in either mainland China or Hong Kong.

They then approach a Kenyan business owner, preferably those whose daily turnover is in hundreds of thousands, and whose clients prefer to pay using credit or debit cards.

LUXURY RESORTS

Alternatively, these business people could be owners of establishments, such as high-end hotels and luxury resorts, whose main clientele are foreigners who prefer using plastic cash as opposed to hard cash.

Typically, such businessmen or establishments operate point of sale terminals — which are usually portable machines issued by local banks depending on the volume of their transactions.

The electronic devices are used to process card payments at retail locations and they accept all card types and prints receipts.

BUY NOTHING

The foreigners in the syndicate run a credit card loaded with cash on these machines purporting to be purchasing goods or services rendered by the Kenyan business — yet in actual sense they end up buying nothing.

In a matter of minutes, the money will reflect in the firm’s accounts. But in reality, no actual business — that is purchase of goods and services — has taken place. Interestingly, most of the amounts entered supposedly for ordinary goods are huge.

What has happened is that the Chinese national and the Kenyan businessman have simply engaged in money laundering and tax fraud.

CONTINENT WIDE

It is then time for Part two: After running the credit card, the Kenyan businessman then leaves his POS machine with the Chinese as collateral. When the money hits the account, the Kenyan businessman then withdraws it and shares it with the Chinese getting the bigger share.

For example, if the Chinese had run the card for Sh1 million, he will be given back Sh600,000 while the Kenyan businessman remains with a cool Sh400,000 for his troubles.

Our sources say that Kenya has become a favoured operational point for the syndicate, due to its well-developed economy, modern banking systems and fairly developed IT systems. However, we established that the scam is continent wide.

BANKING RULES

Africa has emerged as the last frontier for Chinese scammers who are unable to carry out their schemes in China due to the country’s high penalties for corruption.

Neither can they perpetuate these schemes abroad in Europe or America due to the stringent banking rules in these continents which will smoke them out soonest.

“It is easy for them to do this in Africa, but Kenya is really ideal for them,” said a source in the business world who has known about the scam for months now.

The strict rules requiring full declaration of sources of huge amounts of money that were introduced by the Central Bank of Kenya (CBK) in the wake of corruption scandals has limited the amounts of cash that can be transacted at a time.

Many local businessmen, we learnt, are hesitant to run more than Sh1 million at ago, fearing that they might call attention of their respective banks who in turn might report them to the CBK.

UNPAID TAXES

They also fear attracting the attention of the Kenya Revenue Authority who might come for money in unpaid taxes and penalties on undeclared income.

Mr James Mburu, the KRA Commissioner Intelligence, said he was not aware of the scam, but said “I would be interested in the tax side of it.”

The Director of Criminal Investigations George Kinoti did not respond to our requests for comment on whether they are aware of the scam.

In an SMS to this writer, Mr Boniface Ngatia Iregi, the head of Banking Fraud Investigations Unit, said he was also aware of such a syndicate.

SH1.75 MILLION

The Sunday Nation has seen a receipt of such a transaction that took place on September 11, 2018 at 2.16pm involving a popular shoe store on Kimathi Street and a Chinese identified in the receipt as Lin Zhi Ke.

Transaction details indicate that the Chinese bought shoes worth Sh250,000. However, our sources say no such purchase took place.

Our sources say that the Chinese had made two previous “fake” purchases at the same store of Sh750,000 each, bringing his total purchases in a span of two weeks to Sh1.75 million.

Based on the 60:40 ratio, the Chinese went home with Sh1,050,000 while shoe dealer made a cool Sh700,000 in a fortnight without selling a single pair of shoe.

When the Sunday Nation visited the store for a comment three weeks ago, the staff said the owner was not in. Our reporter then left his details. However, two days later, the reporter was called by a man who first identified himself as “Adan”, a lawyer to the store owner. “I can assure you that my client has done nothing wrong,” he said calmly.

MOBILE PHONE

When we called the mobile phone number later to ask for clarification, “Adan” turned hostile and threatened unspecified action.

“First of all I am not a lawyer. Secondly, you need to stop this nonsense,” he said as he began a 15-minute long rant on phone.

“Who do you think you are to spoil other people’s businesses? I dare you to write that story and we will deal with you firmly.”

In the phone conversation, “Aden” also said he was “the government” and the authorities knew what was going on.

OPEN DISPLAY

“There is no way you would know about us. Tell us who has sent you and how much they want, but don’t ever threaten us with writing stories,” he said.

Our sources said “Adan” could be working on behalf of a faction within the security agencies which is benefiting from the fraud. He was most likely a middleman between the Chinese owning the credit cards and the Kenyan businessmen who are seeking to make a quick kill.

For a week last month, the middleman with some of his companions had put up the Chinese at a five-star hotel within the Central Business District where local businessmen thronged with their machines in an open display of impunity, according to our source with knowledge of the operations.

SIX GROUPS

So many were the businessmen that they got impatient at the slow pace of the queue that they caused a commotion.

“After this, the middlemen became wary of exposing the Chinese to a lot of people for his own safety,” said our source.

The so-called Mr Lin Zhin Ke, is said to have quietly slipped out of Nairobi this week and gone back to China to “refill” his cards. He is thought to be the head of one of the six groups of suspected foreign criminals running money laundering schemes in Nairobi.