When pseudo-Nairobi pastor Peter Alfred Ndakwe wanted to hide the Sh1.9 billion he had skimmed from the pyramid scheme he had founded, the only place he could stash his loot was in Panama – an offshore haven for legal and illegal cash.
With the help of a Nairobi law firm, Ndakwe managed to open two offshore companies, Sun Jopkins SA and Penkinson SA, which would conceal the ownership of 11 other firm that the law firm had set up for him as he bilked more Kenyans as chairman of Clip Investment Sacco Limited.
Ndakwe was a small fish in the sea of pyramid schemes that had flourished in Kenya from 2006, and which went down with close to Sh8 billion. To date, the victims have yet to get justice.
While Ndakwe managed to get away with his loot, former Kenya Power and Lighting Company Managing Director Samuel Gichuru and former Finance Minister Chris Okemo were not as lucky after their accounts with close to Sh450 million were exposed in Jersey as proceeds of crime.
Gichuru and Okemo, who are still fighting in Kenyan courts to stop extradition, had wired the money said to have been kickbacks from tenders in the energy sector to the accounts.
Opening offshore accounts is a multi-billion-dollar business and Gichuru and Okemo were in 1986 assisted by Deloitte & Touche, a Jersey accounting firm, to actualise their ambitions.
For his part, Ndakwe was introduced to Mossack Fonseka, a firm that had been founded in 1977 by German-born Jurgen Mossack and a Panamanian man named Ramón Fonseca, and which had become famous for creating dummy companies in Panama via its affiliated offices in 44 countries.
When the Panama papers were discovered, it emerged that Mossack Fonseka had a long list of shy clients who included Rami Makhlouf— the richest and most powerful businessman in Syria believed to be President Bashar al Assad’s “bagman” plus associates of Muammar Gaddafi and Robert Mugabe.
According to a Task Force Report on Pyramid Schemes tabled in Parliament, Ndakwe is alleged to have also bought plots in Runda— L.R 14970/15, 14970/14, 14970/7 and 14970/6— worth Sh200 million and had transferred the properties to Pakinstar Limited, owned by this new Panama firms, Sun Jopskin SA and Pentinkson SA.
If anyone checked the owners of those plots, he would end up into a briefcase company in Panama with pseudo-directors usually hired to shield the real owners.
This is because a local client can secretly appoint foreign directors as pseudo-owners of the company and he secretly gets letters to operate the bank accounts on behalf of the companies.
Court of appeal squashes extradition order for Okemo, Gichuru
Panama has long been one of the favourite secrecy jurisdictions of the Americas due to its lax financial laws that for many years made it extremely attractive for those looking to move money anonymously. It has also been used for corporate tax evasion.
The reason why companies love Panama— or other offshore jurisdictions— is that full disclosure of beneficial ownership information was not a requirement.
While this made the system susceptible to abuse, it also made it attractive.
While there have been legitimate reasons to operate shell companies, at times as special purpose vehicles, they have also been used for money laundering.
Studies by World Bank have previously indicated that about 70 per cent of anonymous shell companies were involved in grand corruption.
Of late, there has been push to lift the lid off the shell companies and foundations that have been set up offshore as part of global attempts to fight money laundering and tax evasion.
In Kenya, state officers need permission from the Ethics and Anti-Corruption Commission (EACC) to open foreign bank accounts.
While the EACC Chief Executive Twalib Mbarak had notified Foreign Affairs Principal Secretary Macharia Kamau, through a letter dated September 20, 2020, the number of accounts held by state officers is still unknown – and remains hidden.
In 2015, EACC issued a 49-day ultimatum to public officers operating bank accounts outside the country without approval to either close them or face the law.
So far, nobody appears to have faced prosecution. This followed a revelation that Kenyans were holding close to Sh51 billion abroad in 463 HSBC private banking arm's accounts.
While not all offshore companies are used to hide loot, others have been opened for ease of business and to protect companies.
As more papers continue to emerge on offshore accounts, it now appears that the hiding space is getting narrow.
