By Jerameel Kevins Owuor Odhiambo
In 2023 alone, Kenya lost an estimated $1.3 billion to illicit financial flows, money that could have built 260 modern hospitals or employed 650,000 teachers for a year. This isn’t just a statistic it’s the difference between a thriving economy and one that constantly struggles to meet its citizens’ basic needs. Capital flight in Kenya works like a leaking bucket. Imagine a family where one member earns money but immediately sends it all to relatives abroad, never buying from local shops or investing in home repairs. Eventually, the neighborhood suffers because money isn’t circulating. This is exactly what happens when wealthy individuals, corporations, and even corrupt officials move money out of Kenya through various channels offshore accounts, fake import invoicing, dividend repatriation by multinational companies, and outright corruption proceeds hidden in foreign banks.
The legal framework currently makes capital flight too easy and too profitable. Our tax laws have loopholes big enough to drive trucks through. For instance, multinational companies operating in Kenya legally shift profits to low-tax jurisdictions through transfer pricing, essentially selling goods to their own subsidiaries abroad at artificially low prices or buying from them at inflated prices. A mining company might sell gold to its parent company in Switzerland at half the market rate, meaning Kenya loses tax revenue on the real value. Meanwhile, our laws don’t adequately punish those caught moving money illegally, making the risk worth taking for many.
From a practical standpoint, why does this happen so persistently in Kenya? First, corruption creates illegal wealth that must be hidden abroad to avoid detection. Second, wealthy Kenyans don’t trust the local economy’s stability, so they hedge their bets by keeping money overseas. Third, our currency fluctuations and inflation make foreign currencies more attractive stores of value. Fourth, multinational corporations view Kenya as a profit extraction point rather than a long-term investment destination. Finally, our financial institutions and regulatory bodies lack the technology, training, and political will to effectively track and prevent illicit outflows.
The first solution must be strengthening financial transparency and enforcement. The Kenya Revenue Authority needs real-time access to international banking information through effective implementation of the Common Reporting Standard. This means every bank transaction above a certain threshold gets automatically reported and cross-checked against tax declarations. We need to make it legally mandatory for all companies, especially multinationals, to publicly report their revenues, profits, and taxes paid in Kenya no exceptions, no extensions. The penalty for non-compliance should be severe enough to hurt: immediate suspension of business licenses and directors personally liable for fines equivalent to the concealed amounts.
Second, the government must close tax loopholes and simplify the tax code. Transfer pricing regulations need teeth, every transaction between related companies across borders should be scrutinized against market rates by an independent valuation body. We should introduce exit taxes on capital leaving the country, similar to what South Africa does, where moving significant funds abroad triggers a tax obligation unless you can prove legitimate business or personal purposes. Simplifying the tax code also means fewer opportunities for creative accounting; if a small business owner can understand the tax system, there’s less room for expensive lawyers to exploit it.
Third, we need to make keeping money in Kenya more attractive than sending it away. This means creating stable, high-return investment opportunities locally. The government should establish development bonds specifically for infrastructure projects with guaranteed returns that compete with foreign investment options. Commercial banks need incentives to offer better interest rates on long-term deposits. We must improve our investment climate by reducing bureaucratic red tape, if starting a business takes weeks instead of months, and enforcing contracts doesn’t require years in court, local investment becomes more appealing than foreign speculation.
Fourth, technology and collaboration are essential. Kenya should implement blockchain based tracking for large financial transactions, making it nearly impossible to hide money trails. We need to actively participate in international efforts like the Financial Action Task Force and demand that tax havens cooperating with Kenya get preferential trade terms, while those refusing face restrictions. Our banking system should adopt AI-powered systems that flag suspicious transactions in real time, automatically alerting authorities when patterns suggest money laundering or capital flight.
Finally, this fight requires political will more than anything else. The government must prosecute high-profile cases of capital flight publicly and successfully, sending a clear message that the days of consequence-free theft are over. We need witness protection programs strong enough that people feel safe reporting capital flight. Budget allocations to investigative and regulatory bodies like the Ethics and Anti-Corruption Commission must increase substantially you cannot guard the vault with one underpaid security guard. Most importantly, leaders must lead by example, keeping their own wealth within Kenya’s borders and investing visibly in the country’s future. When citizens see their taxes building roads instead of foreign bank accounts, trust returns, and with trust comes voluntary compliance. Capital stays where it feels safe, valued, and productive—Kenya must become that place.
The writer is a legal researcher
The Mount Kenya Times