The housing boom in Kenya and dramatic increases in housing prices in Nairobi has prompted the Kenyan government to launch an investigation into property owned by foreigners according to a report by the Associated Press. The investigation is the result of allegations that Somali pirates are buying real estate in Kenya in record numbers with ransom money. Prices in Nairobi have tripled in the last five years. In the last 24 months alone, Somali pirates have been paid more than US$100 million in ransom money, all of it proceeds of crime that is subsequently laundered.
Kenya’s shared border with Somalia makes it an attractive destination for laundering money in real estate or in other venues. Kenya recently introduced modern anti-money laundering and terrorist financing legislation but the legislation has not been declared in force yet.
The United States Department of State 2010 International Narcotics Control Strategy Report lists Kenya as a major money laundering centre and states that the laundering of funds related to Somali piracy is a substantial problem. Authorities believe that criminals use Kenya’s financial system to launder over US$100 million each year. According to the Report, there is also a black market for smuggled goods in Kenya, which serves as the major transit country for Uganda, Tanzania, Rwanda, Burundi, northern Democratic Republic of Congo, and Southern Sudan.