Kenya has established the Financial Reporting Centre to combat financing of terrorism activities in the country and in the East African region.

This will have a major impact in other countries in the region since Kenya, and especially Nairobi, has been pointed out as a major destination for the proceeds from piracy in the Indian Ocean and a key transit point for terrorist funds to neighbouring Somalia.

The country’s Anti-Money Laundering Advisory Board, whose mandate is to advise FRC, said it has approved the centre which will combat illicit financial activity.

“The Ministry of Finance and Central Bank of Kenya have agreed to provide office space and second staff to the FRC on an interim basis,” board chairman John Wanyela said in a statement issued in Nairobi.

Mr Wanyela said the main objective of the centre is to assist in the identification of proceeds of crime and combating money laundering by developing anti-money laundering policies in consultation with the board.

“The centre will also receive and analyse reports of unusual or suspicious transactions that may be associated with money laundering and forward them to appropriate law enforcement authorities for action including prosecution,” he said.

In 2009, Kenya enacted Proceeds of Crime and Anti-Money Laundering Act after four unsuccessful attempts since 2004 to enact a law to prevent the concealment of large profits from drug trafficking and other organised crimes.

But even then, George Kegoro, the executive director of International Commission of Jurists, Kenya Chapter, doubted the political will to completely stamp out money laundering in Kenya.

Piracy off the coast of Somalia coast continues to pose a threat to international shipping.

In the first half of 2011 more than 154 ships were attacked, with 21 hijacked and a total of 362 people taken hostage.

The One Earth Foundation estimates that in 2010 alone the costs of Somali piracy to the global economy ranged between $7 billion and $12 billion.

Last month, Kenya’s private sector called on the government to fast-track policies that promote financial integrity and combat financing of terrorism activities.

Carole Kariuki, the chief executive officer of the Kenya Private Sector Alliance (KEPSA), said that establishing a functioning Financial Reporting Centre will enable the government to avoid the downgrading of Kenya in international financial transactions.

Ms Kariuki noted that the Financial Action Taskforce (FATF), through the East and South African Anti-Money Laundering Group, had put Kenya on its black list of countries making insufficient progress in implementing effective anti-money laundering and counter-terrorism finance enforcement measures.

“If no measures are taken by the government, Kenya stands to be downgraded by FATF and this will have a serious negative impact on the private sector,” Kariuki told the investors in Nairobi recently.

The United States has also been pressuring Kenya to address strategic deficiencies in the anti-money laundering laws in order to combat the financing of terrorism, especially Al-Shabaab’s financial support networks.

Additional reporting from Xinhua