The foreign executives of betting MozzartBet are living on a borrowed time following reports that Kenyan authorities are following serious fraud leads that could see them deported like many others have fallen on their knives before. This follows the court’s verdict that the directors of the firm were involved in heavy scale money laundering leading to the state seizing more that Sh300M which was determined to be proceeds of crime.
Justice Esther Maina ruled that the money held in three bank accounts was part of a money-laundering scheme and should be forfeited to the government.
It is now emerging that the Financial Reporting Centre (FRC) and the Directorate of Criminal Investigations (DCI) opened investigations on the bank accounts of the company and are expanding their scope of investigations following the court’s decision, we’re told the firm and directors are being investigated for possible tax evasion and siphoning of money to tax havens. This has been a common scenarios with other betting firms caught in the same circumstances.
So far, focus is on the firm’s foreign directors; country manager Sasa Krneta, his deputy who is a Zimbabwean, Loncar Koviljka a Serbian, Melentijevic Branimir and Emmanuel Charumbira, a Zimbabwean national who sits in the board as a director and also as a shareholder.
As this boils, a lobby group Kenyan Allies Group has written a petition to Fred Matiang’i the CS Ministry of Interior and Coordination of National Government demanding that the firm’s foreign directors be deported for having been involved in a criminal act impacting the struggling economy.
According to the letter addressed to the CS and copied to Kenya Insights, the lobby group through their Secretary General Mr Dalmas Osogo, wants the minister to order deportation of the directors in the same way he had done to other betting firms directors during the crackdown in the past years.
”The courts have determined that the company and the directors were actively involved in active money laundering a criminal act in the country. Kenya must not be a safe hub for criminal elements and especially at a time when we’re struggling with heavy burden of cost of living. Investors who want to bleed our country more must not be tolerated and we request for your quickest intervention in this matter.” Reads part of the letter.
The group has threatened to move to court in 14 days should the CS fail to address their plight saying that Kenya must not have a space for criminals.
In 2019, the state revoked licenses of 27 betting firms and deported their directors for engaging in tax evasion and money laundering.
The companies affected include SportPesa, Betin, Betway, Betpowa, Supadollar, Premierbet, Lucky 2 U, 1XBet, Dafabet, Bet Yetu, Millionaire Sports Bet, Palmsbet, Bungabet and Bet Boss among others.
CS Matiang’i was instrumental in the crackdown saying gambling is destroying the Kenyan society and turning youths into zombies, he personally oversaw the deportation of the directors found deep haves in the cookie jar.
MozzartBet Fraud
Justice Esther Maina last month ruled that MozzartBet’s money held in three bank accounts for over 2 years was part of a money-laundering scheme and should be forfeited to the government.
Court filings show that MozzartBet used its paybill number 290059 to send the money to Kimaco Connections to its paybill 311372. The highest amount sent was Sh50 million in a single day while the lowest was Sh1.8 million.
ARA said that MozzartBet sent a total of Sh256 million within five days, flagging the funds as suspicious. The funds were later moved to an account at Co-operative Bank.
The firm had defended the millions saying it had contracted another firm to supply an IT software for use in the betting business.
“The applicant (Assets Recovery Agency) has adduced evidence that proves that the 1st respondent (Kimaco Connections ltd) was a shell company incapable of even paying rent for the premises it occupied,” the Judge said.
The judge wondered why the betting firm would pay a third party to procure the software, from a sister company, unless the intention was to launder money.
MozzartBet had claimed that it paid the millions to acquire software from Kimaco Connections, which the latter says it subcontracted another firm– Open Skies Connections—to deliver the IT platform.
The State, however, pointed out that Mr Peter Kiilu, the proprietor of Kimaco Connections, did not avail the agreement or contracts he alluded to in his statement between Mozzartbet Kenya ltd and Open Skies Management Services.
The money includes Sh251 million in an account at Diamond Trust Bank, Sh50 million at Cooperative Bank, and Sh2.4 million at NBCA Bank.
The betting firm said the money was contributions from their shareholders and that it entered into a contract with Kimaco for the supply of IT software. The software was not supplied after the funds were frozen.
In the judgment, Justice Maina said it was instructive that some of the funds also ended up in the pockets of some directors of Mozzartbet including former MP Musa Sirma.
The investigations by ARA showed that Mr Kiilu moved Sh150 million to a fixed deposit account and left a running balance of Sh101 million.
Investigations also revealed that Mr Charumbira (Zimbabwean) is a director of both MozzartBet Africa and Open Skies Connections, the firm that was allegedly sub-contracted to supply the software.
The company had between February and June, received Sh384 million from the betting firm and the amount was banked at Co-operative Bank, with Sh50 million put in a fixed deposit account and a running balance of Sh269.7 million.
The agency revealed in the court documents that the monies were later distributed to various companies associated with directors and shareholders of the betting firm.
The shareholders of MozzartBet Kenya as per CR12 attached to the court documents are Mr Sirma with zero shares, Mid Logistics ltd with 300 shares, and MozzartBet Africa, registered in Mauritius holding 700 shares.
The agency flagged the transactions saying there are reasonable grounds to believe that the bank accounts and M-Pesa paybills were used as conduits of money laundering.
The agency said the use of mobile money transfer services to transfer funds from MozzartBet Kenya Ltd and Kimaco Connections Ltd was adopted to circumvent or evade the reporting threshold and Central Bank of Kenya prudential guidelines for account holders to declare the source of funds.
Appeal
Meanwhile, MozzartBet has returned to court in a desperate bid seeking the court to reverse the decision of the court allowing state to seize the Sh302M which were declared as proceeds of crime.
The firm says in a notice of appeal that it risks losing the millions of shillings meant for the purchase of a software in the upgrade of its betting business.
The company says it had paid Sh256 million, which was part of the money seized and forfeited to the State, to acquire a customised betting software.
MozzartBet is appealing and has asked for a suspension of the forfeiture, pending the determination of the appeal.
“Should its appeal succeed, the interested party (MozzartBet) will face serious, potentially insurmountable, hurdles recovering them, given, what is a matter of public notoriety, the process of recovering judgments against the government and its agencies,” the company said in the application.
“As a first instance court, which is not infallible and given that the interested party has a right to appeal, this court has got both the jurisdiction and in appropriate case, a duty to preserve the subject matter of such an appeal by granting such interim relief as may be appropriate.”
Money Laundering Summary.
Money laundering describes the process by which criminals try to conceal the illicit origin of their money by making such proceeds appear to have derived from a legitimate source. A relevant United Nations study shows that about 2% to 5% of the world’s GDP is laundered every year, which is around $800 billion to $2 trillion. There are many ways that criminals use to legitimize their income, with sports betting being one of them.
First, we need to point out that there are three stages in money laundering: placement, layering and integration. The first is when illicit proceeds are placed into the financial system, the second refers to the process of disguising the audit trail of that money by moving it around, and the third concerns the appearance of that money as legal through, for example, real estate and other purchases. All of the above-described stages of money laundering may take place in the betting process.
Money launderers may attempt to use gambling as a quick and easy way to legalize their illicit income by placing that money in a legitimate gambling company. A common practice is the use of online gambling which is one of the newest and most common methods of money laundering. Individuals may open an online betting account where they enter their bank account number. They can then deposit money from various payment options, even anonymous ones such as prepaid cards, in that account. After depositing the money, the player has no or minimal betting activity and requests a refund of the money already deposited in the gambling account. As a result, the money is legitimized and can be justified, since it comes from a legitimate company and is considered as a result of betting activity.
Another way one can legitimize illegal income through sports betting is through segregation. A player chooses both bet options. This is most effective in cases where there is a binary choice. For instance, in soccer games you can bet for over 1.5 or under 1.5 goals. Put simply, you will bet $5,000 on over 1.5 and $5,000 on under 1.5. Let’s say that the game ends 1-0. That means that you will lose the $5,000 you placed on the over 1.5 goals. However, you will make at least a portion of that through your earnings from the $5,000 you placed on the under 1.5 goals. Despite sacrificing some money, the money launderer legalizes a large part of their money by justifying the profits received from the gambling company as a result of the betting activity.
The betting industry has grown over the years to hit a combined revenue base of over Sh200 billion, offering a perfect market for criminals seeking to launder dirty money.
Betting is in a list of other transactions targeted in the war on money laundering including selling of property; creation, operation and management of companies, management of bank, savings and shares accounts on behalf of clients.
The Proceeds of Crime and Money Laundering (Amendment) Bill, 2021 also targets to designate advocates, notaries and other independent legal professionals as reporting entities for dirty cash dealings.
The United States government has put Kenya on a list of global hotspots for money laundering, citing insufficient controls on the circulation of dirty cash and the lack of laws against terrorism financing.
A report by the United States Department of State Bureau for International Narcotics and Law Enforcement Affairs said money laundering in Kenya occurs in the formal and informal sectors, fuelled by domestic and foreign criminal operations.
Kenya has been working on curbing money laundering, before 2021, the Central Bank of Kenya (CBK) required commercial banks to record and report all transactions above Sh1 million (approximately $10,000).
