Residents of the East Africa Community have more money stashed away in Swiss banks than those from any other region in Africa, a new report reveals. The Swiss National Bank (SNB), the central bank of Switzerland, in its latest report on the country’s banking sector states that the EAC countries of Burundi, Rwanda, Uganda, Tanzania and Kenya have at least $1.3 billion in the country.

Kenya tops the list with $857 million followed by Tanzania ($178 million), Uganda ($159 million), Rwanda ($29.7 million and Burundi ($16.7 million).

While the cash-detailed by SNB as foreign liabilities held by Swiss banks in 2011-is not necessarily listed as dirty money, EAC countries have been grappling with capital flight, with individuals said to have set up companies and accounts in tax havens. Kenya’s Finance Minister Robinson Githae hinted the government would investigate the ownership of these accounts. “Treasury has no idea of the source, the owners and how the money ended up there,” Mr Githae told The EastAfrican.

“Although some could belong to investors doing businesses in foreign currencies, I don’t understand why someone would put their money outside when it is allowed to operate dollar accounts in Kenya.”

Anti-graft activists say huge unreported flows of money are leaving the EAC countries every year, ending up in rich countries or tax havens, denying nations desperately needed tax revenues. They argue that tracing, freezing, confiscation and repatriation of stolen assets is a cumbersome process because of differences in legal systems, the high costs of co-ordinating investigations, inadequate international co-operation and bank secrecy laws.

“Most of these funds are dirty money and the accounts have been growing with time. It is a big task for governments to find out the sources of these funds and the owners,” said John Githongo, a Nairobi based anti-corruption campaigner. “The incidence of money being stashed abroad usually rises around elections, so it is expected Kenya’s share will grow in the remaining part of the year,” said Mr Githongo, a former ethics and governance permanent secretary.

Contrary to popular belief, only a small share, three to five per cent, of illicit capital flight stems from corruption, a 2011 report dubbed Bringing The Billions Back said.

“Instead, almost two-thirds originates from multinational companies evading tax, and one-third is a result of criminal activities such as trade in humans, drugs and weapons,” said the report authored by Dr Attiya Waris, a lecturer at the School of Law at the University of Nairobi and Kristina Fröberg, a political scientist at Forum Syd in Sweden.

“Illicit capital flight has severe consequences for developing countries-it cancels investment, undermines trade, hurts competition, worsens income gaps and drains hard-currency reserves,” says the report.

Its authors estimate that in 2008, Tanzania topped the list of illicit capital flight with over $5.1 billion followed by Uganda ($4.8 billion), Rwanda ($3.3 billion), Kenya ($2.6 billion) and Burundi ($2 billion). According to a report from Global Financial Integrity, the average of illicit outflows per year from Kenya during 2002-2006 is estimated at $686 million. In Tanzania, the report estimates revenue lost through a combination of tax exemptions and illicit trade involving foreign countries and multinationals amounts to over $1.2 billion a year.

The SNB figures do not include money that individuals may hold in other’s names or that is managed by wealth funds. Global pressure has been rising on Switzerland to ask its banks to share information about their clients with foreign governments. It is suspected that foreigners holding illicit wealth in Swiss banks may be moving their funds for fear of being exposed due to growing scrutiny.

Although Swiss banks’ policy of secrecy and customer protection allows for such money to be paid in, Switzerland has adopted what is arguably the world’s toughest law for repatriating the ill-gotten gains of corrupt politicians to the people of those countries, allowing the country to return potentially corrupt assets more easily to where they belong.

The news about the money stashed in foreign accounts comes as the EAC countries battle budget deficits that have seen them go on a borrowing spree. Kenya’s public debt currently stands at 48.6 per cent of GDP, having marginally declined from the 48.8 per cent recorded in 2011.

Uganda plans to borrow at least Ush2.6 trillion ($1 billion) this year, while Rwanda’s total external debt (including guaranteed debt) is projected to rise to $1.3 billion in 2012 (19.1 per cent of GDP).

As at March 2012, Tanzania’s debt stood at Tsh20 trillion ($12.8 billion).

Most of the billions stashed away in foreign accounts by influential businessmen and powerful politicians are suspected to be proceeds of defence and security-related contracts and payments of fake debts.

Stephen Kaboyo managing director, Alpha Capital Partners said the sums of money mentioned in that report are unlikely to have originated from Uganda. “It is extremely difficult to wire large amounts of money to foreign accounts because of increased scrutiny by local banks.

Therefore, the bulk of that money could have been generated by payments from ‘dirty deals’ done between locals and foreign partners in overseas locations,” he said.