Only 926 government agencies disclosed the beneficial owners of companies that won state bids out of more than 33,000 institutions, reflecting slow progress in transparency in public procurement.
Government procuring entities have been asked to disclose beneficial ownership information for awarded contracts on the Public Procurement Information Portal (PPIP) to enhance transparency.
But government agencies and state-owned enterprises kept the beneficial owners of 97.2% of the companies that received public tenders, and hid from view public details such as the names of directors, the identity of the owners, and their shares.
They must also disclose the mailing address, telephone number, and physical address of all winning bidders and tenders.
Besides tracking tax fraud, detection also aims to reduce conflicts of interest and the possibility of officials and companies colluding together to create sham contracts.
The Public Procurement Regulatory Authority (PPRA)’s lack of powers to impose sanctions and penalties on government-linked entities is partly attributable to the lag in disclosures.
“We continue to take measures to increase the availability of beneficial ownership information in public procurement. As of October 2024, 962 out of more than 33,000 procuring entities were registered in PPIP, which held 10,458 awarded contracts with beneficial ownership information disclosed, with a total value of 213.73 billion shillings. International Monetary Fund.
Disclosure of beneficial ownership information is part of IMF-supported structural policies on governance that seek to combat corruption by creating more transparent procurement practices, forensic audits, and implementing laws limiting access to information and asset declarations of public officials.
Procuring government agencies must publish information on awarded contracts on the Public Procurement Information Portal (PPIP) to enhance transparency.
They must also disclose the names of directors, mailing address, telephone number and physical address of all successful bidders and tenders.
Besides tracking tax fraud, detection also aims to reduce conflicts of interest and the possibility of officials and companies colluding to create sham contracts.
Government agencies began publishing beneficial ownership information for entities awarded public contracts through PPIP in November 2022.
The low compliance rate is partly attributable to the Public Procurement Regulatory Authority (PPRA) lacking the powers to impose sanctions and penalties on violating entities.
Project performance evaluation has been limited to issuing letters of non-compliance to procuring entities in the absence of sanctioning powers to enforce requirements.
In addition, it conducted training aimed at improving organizations’ understanding of beneficial ownership disclosure obligations.
The government has informed the IMF that it plans to amend various public procurement laws to take administrative action against accounting officials, heads of procurement functions and state-linked companies.
“Given that the PCA does not currently have powers to impose sanctions for non-compliance, we are conducting a legal review to identify and propose options for implementation, including administrative sanctions against accounting officers and heads of procurement functions in procuring entities,” Kenyan authorities told the IMF. .
“A summary of the proposed amendments was shared with the National Assembly in September 2024 for its consideration. We are also working to integrate the PPIP with other government platforms, including the e-Government Procurement System, which will facilitate the automatic generation of contract award reports, and the BRS (Business Registration Services) e-registry.” To automatically verify beneficial ownership information provided by bidders.”
The BRS, for its part, has moved to tighten compliance with requirements for beneficial ownership information of private companies that includes the names, telephone numbers and residential addresses of secret shareholders who control more than 10 percent stakes in entities.
Companies are expected to fully comply with the disclosure requirements or risk being removed from the private company register from December 1 this year.
These disclosures are expected to open the way for the Kenya Revenue Authority (KRA), security agencies and the Financial Reporting Center (FRC) to leverage the information to track down money launderers, corrupt individuals and tax fraudsters.
Low levels of awareness among private companies and a high prevalence of dormant companies have also led to reduced disclosures, with more than half of private companies at risk of de-registration due to non-compliance.
As of October 24, 50.28% or 399,595 registered companies had not yet disclosed the identity of their secret shareholders, putting them at risk of being struck off the commercial register after the November 30 deadline.
The requirement to provide beneficial ownership information seeks to cover the risk of entities being misused to facilitate criminal activities such as corruption, money laundering, terrorist financing and widespread tax evasion.
The BRS sought to incentivize beneficial ownership disclosures by, among other things, improving the compliance process, hosting the disclosure portal on the e-Citizen platform, and reducing the cost of registration to zero.
The registry has also provided a guide to compliance even as it now looks to impose penalties to crack down on errant private companies.
“In line with our commitment to enhancing compliance, we are intensifying stakeholder engagement and public awareness campaigns. These efforts aim to ensure that all required entities meet and comply with their obligations before the upcoming deadline,” Registrar of Companies, Joyce Koech, previously told this publication.
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