A recent thread on Twitter by @JelaniMK has exposed how car dealerships and car yards in Nairobi are being used as fronts for money laundering by criminals who have amassed wealth through illegal activities such as corruption, drug trafficking, and fraud.
The thread, which has gone viral, explains the modus operandi of these shady businesses and how they evade scrutiny from the authorities.
Money Laundering through Vehicle dealerships and Car yards. A Thread.
🧵— Lee (@JelaniMK) September 11, 2023
Over the past 12 years, Nairobi has witnessed an unprecedented proliferation of car dealerships and car yards lining its bustling roads.
This phenomenon has not gone unnoticed, raising questions about its correlation with the alarming surge in public fund embezzlement and other illicit activities.
The connection becomes even clearer when considering the preference for luxury vehicles among the individuals involved in these activities.
A 2019 report on money laundering revealed that criminals are drawn to conspicuous displays of wealth, making flashy cars, ostentatious jewelry, and lavish club expenditures their hallmarks.
Notably, these cars are predominantly purchased with cash.
The Physical Trips
One of the key aspects of this money laundering scheme involves frequent physical trips, primarily because electronically transferring large sums of money tends to raise suspicion with central banks.
The conventional approach is to physically deliver the ill-gotten cash to conduit banks or intermediaries, who subsequently process the payments.
These trips are essential for moving substantial sums, especially to jurisdictions where strict regulations on declaring the amount of money you’re carrying are lacking.
The UAE, for example, imposes a maximum limit of $30,000 for travelers, but this rule is rarely enforced, providing ample opportunities to move significant amounts of money without drawing attention.
How the Scheme Works
The process begins with criminals using their illegal gains to purchase vehicles.
Once these cars arrive at the port, they are swiftly classified as legitimate assets, with little scrutiny into the source of funds.
These vehicles are often registered under company names, adding layers of complexity to ownership structures and making it more challenging for authorities to seize them.
Cash Payments and Scrutiny
Many dealerships willingly accept cash payments, making it difficult to scrutinize the source of wealth of the supposed “buyers.”
The procedure is straightforward: criminals steal a certain amount, schedule multiple trips to destinations like the UAE, deposit the money directly into the dealership’s account, and then await the shipment of their chosen cars.
The use of private jets and helicopters in the aviation industry is crucial here, as it allows these individuals to avoid the scrutiny often associated with commercial flights.
Minimal Scrutiny at Dealerships
In stark contrast to banks, vehicle dealerships worldwide face minimal scrutiny and are not subjected to the stringent anti-money laundering regulations that financial institutions must adhere to.
This lack of oversight provides a haven for criminal entities to operate with relative impunity.
In some cases, dealerships engage in questionable transactions among themselves, ostensibly selling cars to create clean banking records.
Covering Up Transactions
Dealerships may also resort to deceptive tactics, such as claiming to have sold a vehicle without the actual buyer taking possession.
In this scenario, the criminal entity covers up payments for illegal activities, like drug deals.
These transactions are recorded as legitimate car sales, concealing the true nature of the funds involved.
Establishing “Financing Firms”
To further obfuscate their activities, some dealerships establish “financing firms” that ostensibly help clients secure car financing.
These entities add yet another layer of money laundering and client protection. While not all vehicle dealerships are involved in such practices, a significant number in Kenya seem to serve as conduits for concealing the proceeds of crime and embezzled government funds.
Global Scope of the Issue
The conspicuous displays of wealth by individuals driving fancy cars in Nairobi are not unique.
Similar instances have been uncovered in other countries, such as the UK, where the 2017 McMenamy report revealed that the Spanish Kinahan cartel set up networks of garages to launder drug money through car sales.
As the prevalence of money laundering through vehicle dealerships continues to grow, it is crucial for authorities to take decisive action to combat this menace and safeguard the nation’s financial integrity.
The Central Bank of Kenya (CBK) must intensify its efforts to root out this insidious practice, both in Kenya and globally, to protect the financial stability of the nation.
The sight of opulent vehicles on Nairobi’s streets should not obscure the need to address the sources of funds fueling this trend.
