A State agency charged with tracking illicit money is investigating SportPesa for possible money laundering in the wake of claims the sports betting firm wired $278 million (Sh30 billion) from its local accounts to offshore banks.
The Financial Reporting Centre (FRC) will seek to establish if the billions of shillings earned from the online betting craze in Kenya were declared to the gaming regulator, the Betting Control and Licensing Board (BCLB).
The agency will also probe whether SportPesa paid taxes on the Sh30 billion that is said to have been transferred to tax havens of Isle of Man, the Canary Islands as well as Dubai over a three-year period.
The fate of the billions of shillings has triggered a bitter fallout among the wealthy, politically influential Kenyans and Bulgarian investors who helped to found SportPesa.
Kenyan entrepreneurs Paul Wanderi Ndung’u and Asenath Maina, who own a combined 38 percent stake in SportPesa’s holding company Pevans East Africa, last month blew the lid on the shareholder wars that have been simmering since 2017 and the transfer of the billions of shillings to the offshore accounts.
“The matter is of public interest, and we will investigate to establish if there was criminality in the movement of the billions offshore,” said Saitoti Maika, the Director-General of FRC.
“We emphasise that moving money offshore is not an illegality, our mandate is to establish if there were breaches in regards to cash movement.”
Under the Proceeds of Crime and Anti-Money Laundering Act of 2009, which created FRC, those found guilty risk asset seizure, fines and jail terms or both.
Individuals, for instance, face maximum imprisonment of 14 years, a fine of up to Sh5 million or the value of the property involved in the offence, whichever is higher.
For companies, the fine could reach Sh25 million or the amount of the value of the property involved in the offence, whichever is higher.
For international crimes, Kenya can seek co-operation of other jurisdictions in investigations and enforcement actions, including asset seizure.
Such requests for extradition and mutual legal assistance are principally channelled through the office of the Attorney-General.
Mr Ndung’u and Ms Maina claim SportPesa’s CEO Ronald Karauri and the foreign shareholders kept them in the dark on the firm’s operations since 2017, arguing that the transfer to offshore accounts happened after the fallout.
Mr Ndung’u says that Mr Karauri, who has a seven percent stake in Pevans, conspired with foreign investors holding a combined stake of 47 percent in the company to implement the controversial transactions.
Ms Maina, who controls a 21 percent stake in Pevans, has demanded a forensic audit on the company starting from 2015, a push that has been resisted.
“After persistent push, the management report indicated that within three years Pevans has transferred over $250 million (Sh27.3 billion) to various offshore accounts in Isle of Man, Dubai and Las Palmas/Canary Islands,” Mr Ndung’u said in an earlier statement.
“Shareholders have also come to learn that subsequent to ceasing operations, $500,000 (Sh54.6 million) has been transferred from Pevans to SportPesa South Africa while another $17.5 million (Sh1.9 billion) has been transferred to Sportpesa Tanzania. We want to know who the beneficiaries of these accounts are.”
At 5:25pm on December 24, 2019, for instance, Sh40.9 million was wired from the Ecobank Kenya account of Bradley Limited (a subsidiary of Pevans which operated the defunct Pambazuka National Lottery) to KenTech S.L.U.’s bank account in Las Palmas, Spain.
The money was allegedly transferred by Mr Karauri without board authorisation to benefit Valentina Nikolaeva, the owner of the technology firm Kentech and who also holds a three percent stake in Pevans.
“It is within your knowledge that Bradley Limited ceased operations about two years ago and KenTech S.L.U. has not provided any service to Bradley within the same period hence this payment is fraudulent and a case of money laundering by some of the company directors to benefit yourselves,” Paul Kinuthia, the managing director of Bradley, wrote to Ms Nikolaeva on December 28, 2019.
“I, therefore, request you to immediately instruct your bank to send this money back to the source or to instruct Captain Ronald Karauri who signed this instruction to recall this money with immediate effect.”
Mr Kinuthia said the cash transfer was done without his involvement despite him being a mandatory signatory to the Ecobank account.
The money was wired to Spain through Commerzbank’s branch in the German financial hub Frankfurt. Mr Kinuthia also wrote to Ecobank, Commerzbank and the Central Bank of Kenya (CBK) in a bid to reverse the transaction.
“It is important to note that Kentech S.L.U. where the money has been transferred is owned by the foreign shareholders of Bradley Limited/Pevans East Africa Limited (SportPesa) where the money has been transferred from,” Mr Kinuthia wrote to the CBK on December 30, 2019.
He told the regulator that Ecobank had not committed to reversing the transaction. The money, which is yet to be returned, was part of Sh44 million that had been set aside to settle Bradley’s liabilities, including compensating employees who lost their jobs.
Mr Ndung’u said that some of the offshore accounts are owned by SportPesa’s businesses outside Kenya, arguing that majority of local shareholders have little say on the global business after their ownership were diluted through a dishonest rights issue.
Nearly all of the foreign shareholders of Sportpesa reside outside Kenya. American Gene Grand and Bulgarian Guerassim Nikolov used to live in Kenya until last year when they were reportedly deported alongside other foreign investors in betting firms that were accused of not paying taxes.
Mr Grand and Nikolov each own a 21 percent stake in Pevans which ceased operations in July last year when its licence was revoked over billions of shillings in unpaid taxes.
The company reached an agreement with the Kenya Revenue Authority (KRA) in September 2019 to pay a total of Sh15.1 billion in 18 equal monthly instalments of Sh838 million but did not follow through on the proposed deal.
Mr Karauri tried to revive the SportPesa brand last month under a new BCLB licensee Milestone Games Limited in which he had acquired an effective 54.4 percent stake through a series of investment vehicles.
The regulator, however, clamped down on the operation within hours, saying the SportPesa trade name belongs to Pevans.
Milestone’s managers Wilson Karungaru and Bernard Chauro have since been charged in court for appropriating the SportPesa brand.