November 23, 2015 / 1:11 PM / 4 years ago

UPDATE 2-Kenya's president says will crack down on corrupt banks, officials

* Kenyatta says graft hurting Kenya’s economic development

* Public frustration mounts over lack of convictions

* Diplomats say Kenya facing “corruption crisis”

* Critics say graft worsened under Kenyatta’s watch (Adds comment by president, activists)

By Edith Honan and Drazen Jorgic

NAIROBI, Nov 23 (Reuters) - President Uhuru Kenyatta said on Monday Kenya would introduce new anti-corruption legislation, blacklist officials accused of graft and strip licenses from banks violating money-laundering rules.

Public frustration in the nation of 44 million people has mounted in recent months over the failure to prosecute top officials accused of graft.

The president said theft by government officials was hurting economic development and promised to improve investigations into corruption and increase prosecutions.

“I will lead a national coordinated effort ... to reverse perverse incentives that lead to corruption, close the loopholes that dishonest officials use to steal and to tighten our legislation work,” Kenyatta said in a televised speech.

He spoke after Bob Collymore, chief executive of Kenya’s biggest telecoms firm Safaricom, presented him with a proposed anti-bribery bill drafted by the private sector.

Among new measures, Kenyatta said all businesses would have to sign an ethics code and companies and officials violating the code would be blacklisted for at least five years.

“The government will not engage in business with companies with blacklisted members,” Kenyatta said.

Companies and investors cite pervasive graft as one of the biggest challenges to doing business in Kenya and U.S. President Barack Obama raised the issue when he visited in July.

In an unusual move, earlier this month the ambassadors of the United States, Britain and nine other countries said Kenya faced a “corruption crisis” and they would step up efforts to prevent the flow of illicit funds out of the country.

SCEPTICS

Kenyatta faces a tough task in winning over sceptics who say corruption has worsened under his watch.

“This speech was an admission of failure, an admission that nothing has happened in the last year,” said Patrick Gathara, a political cartoonist and commentator.

John Githongo, Kenya’s former anti-graft tsar and the country’s most outspoken anti-corruption activist, said: “My concern is that every time he makes one of these speeches things get worse not better. Sadly President Kenyatta’s credibility on this issue is rock bottom.”

Kenyatta said Kenya had signed agreements with an unspecified number of countries to deal with illicit wealth acquired in Kenya. “We will look to sign more such agreements,” he said.

Kenyatta said banks which violate anti-money-laundering regulations “will, at a minimum, lose their banking licenses”, while the Central Bank of Kenya (CBK) would urgently strengthen its supervision capabilities over banks.

The focus on the banking sector comes after CBK took over management from two banks. In the case of medium-sized lender Imperial Bank, fraudulent withdrawals totalling more than 34 billion shillings ($333 million) brought the bank to its knees, according to court documents.

Kenyatta conceded his previous anti-graft measures have not been implemented fast enough, citing red tape.

He also promised he would not raise taxes in the coming financial year.

“I’m of the mind, fellow Kenyans, that we in government should take better care of your money before we ask for your taxes and we are therefore going to insist that we have no increase in overall government tax in the next financial year,” he said. (Writing by Drazen Jorgic; Editing by Edith Honan and Janet Lawrence)

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