Employees of a digital firm with UK roots made payments into the accounts of a dummy company they formed and disguised as the Kenya Revenue Authority (KRA), causing the taxman more than Sh1 billion in revenue loss.
Details of the alleged fraud have been laid bare in a suit the KRA has filed against the proprietor of the dummy company, who has also been arrested and charged with fraud.
The KRA says in court documents that what started as a tax assessment and demand for Sh49 million saw its investigators stumble on a massive fraudulent scheme through which staff in the company’s local subsidiary have been diverting tax payments to a private firm named as Keycorp Real Advisory (KRA) Limited.
Keycorp Real Advisory’s initials, KRA, were made similar to that of the taxman, not by coincidence but intentionally to ease diversion of cash meant for tax payments.
The KRA claims that Keycorp Real Advisory Limited regularly receives what is supposed to be tax remittance from Oxygen8 Kenya Limited, then wires it to the accounts of another company called Centrica Investment.
The KRA has intercepted part of the cash and frozen the accounts of Centrica Investment and Keycorp Real Advisory Limited.
Oxygen8 is a digital company that deals in text message (SMS) value-added services and mobile financial services.
The group describes itself on the website as a “global provider of integrated mobile solutions with offices in 11 countries, operations in over 32 countries and a turnover in excess of £120 million (about Sh15.5 billion)”.
“Working in partnership with its clients, Oxygen8 enables businesses to drive new revenue streams, improve customer communication, build brand awareness and increase customer loyalty,” the company says.
Oxygen8 is headquartered in Birmingham, UK, but also has offices in London, Australia, Canada, the Caribbean, Ireland, Kenya, South Africa, US, Singapore and Uganda.
The KRA says it had found Sh117,833,600 in Centrica’s bank accounts at the Commercial Bank of Africa at the time of investigations, and that the probe was still ongoing “with strong indications that the amounts in issue are in excess of Sh1 billion.”
Dominic Keng’ara, the KRA’s investigations and enforcement officer, told the court that the initial findings had necessitated expanding the investigations.
The KRA on November 23 arrested Brian Nasiohe Waluchio, the managing director of Oxygen8 East Africa, and charged him with defaulting on an obligation to pay withholding taxes amounting to Sh522 million.
The offence was allegedly committed between January 2016 and October 2018.
While Centrica Investment and Keycorp Real Advisory Limited have denied the allegations and are fighting in court, Oxygen 8 Kenya Limited’s parent firm Oxygen 8 Group Limited opted to co-operate with the taxman.
The UK parent said a preliminary probe had established that some of its staff had been diverting the tax to Keycorp Real Advisory Limited, whose initials are also KRA.
The KRA claims that this information, which Shane Leahy, the group director of Oxygen 8 Group, shared with Kenyan authorities, helped launch further investigations.
Mr Leahy revealed in correspondence with the KRA that the firm has engaged the Directorate of Criminal Investigations and a forensic accountancy company to establish the extent of the issue and invited the taxman to be part of the process.
Oxygen 8 Group undertook to remit all the taxes due directly to the KRA going forward. Oxygen 8 Group also promised to engage the KRA once the internal audit is completed in 45 days.
Mr Leahy said Mr Waluchio is no longer an employee of Oxygen 8 East Africa, but remains a shareholder with 20 percent stake.
Keycorp Real Advisory and Centrica Investment have denied the allegations and have filed a suit seeking to quash the decision to freeze their accounts.
Centrica Investment moved to court on November 13 after the KRA issued agency notice to Spire Bank and Commercial Bank of Africa preserving the money in the firm’s accounts and demanding that the two lenders remit a total of Sh45.8 million being the tax due.
The KRA issued a similar agency notice to Spire Bank, seeking remittance of Sh4 million in respect of Keycorp Real Advisory.
Keycorp Real Advisory and Centrica Investment argued that no demand notice was issued and no assessment was done, and termed the KRA’s move illegal.
The two companies want the High Court to reverse the decision and release their funds.
On November 14, a day after filling the case, Keycorp Real Advisory and Centrica Investment, through a letter written by their lawyer Kevin & Associates, asked Spire Bank not to release any cash to the KRA, noting that it had filed a case against the taxman’s as malicious actions.
Meanwhile, on November 2, the KRA arrested Centrica Investment’s director Peter Weru who has since been charged alongside Keycorp Real Advisory for failing to pay Sh8.25 million.