Explainer: How KRA can track offshore bank accounts used to evade tax

In today’s connected financial world, hiding money abroad is no longer as simple as opening a secret bank account and staying quiet.

Governments are increasingly sharing financial data, and the Kenya Revenue Authority (Kenya Revenue Authority) is now part of a global system that makes it much easier to trace offshore wealth.

This growing transparency is driven by international cooperation and digital reporting systems that link banks and tax authorities across different countries. As a result, money held outside Kenya can still be visible to local tax officials.

 One of the strongest tools used in tracking offshore accounts is the Common Reporting Standards (CRS). This is a global agreement involving more than 70 countries that allows the automatic exchange of financial information between tax authorities every year.

Under this system, when a Kenyan opens a bank or investment account in a participating country, the financial institution collects key details. These include the account holder’s name, address, tax identification number, account balance, and income earned, such as interest or dividends.

The information is first sent to the tax authority in that foreign country. It is then automatically shared with KRA through the CRS network. This process happens every year without the need for KRA to open a special investigation.

This system has significantly reduced the chances of hiding money in standard offshore accounts within participating countries.

Legal backing in Kenya

Kenya strengthened its participation in this global system through the Finance Act 2021. The law requires local banks and financial institutions to collect information on non-resident account holders and report it to KRA.

The law also sets strict timelines, requiring CRS reports to be submitted by May 31 each year. In addition, financial records must be stored for at least five years. This ensures that past financial activity can still be reviewed if needed during investigations.

These rules give KRA a stronger legal foundation to monitor both local and foreign financial activities linked to Kenyan taxpayers.

Despite global reporting systems, some individuals still try to move money into jurisdictions that do not fully share financial data. These locations are known as tax havens.

Tax havens are countries or territories with financial laws that allow high levels of secrecy and low tax obligations.

Some well-known examples include the Cayman Islands, Bermuda, British Virgin Islands, Bahamas, Luxembourg, Ireland, Bahrain, Hong Kong, Mauritius, Seychelles, Isle of Man, and Jersey.

These locations are attractive because they often do not participate fully in CRS or have limited data-sharing arrangements. This makes it harder for tax authorities to automatically track funds.

However, using tax havens does not guarantee full protection. Information can still reach KRA through international cooperation, whistleblowers, leaked financial data, or investigative intelligence from partner agencies.

Local tools used by KRA

Beyond international systems, KRA also uses powerful local tools to track income patterns and spending behaviour.

One major source of data is mobile money transactions, especially M-Pesa. Large or frequent transfers that do not match declared income can raise red flags during audits.

Banks in Kenya also provide financial data that helps KRA identify suspicious deposits or unexplained wealth accumulation.

Another important system is the Electronic Tax Invoicing Management System (eTIMS). This platform records business sales and invoices in real time. It helps KRA compare declared income with actual business activity, making underreporting easier to detect.

KRA also connects with several government databases. These include Kenya Power billing records, vehicle registration systems, and aircraft ownership data. These sources help identify individuals whose lifestyle or asset ownership does not match their declared income.

In addition, systems such as the Integrated Financial Management Information System (IFMIS) and the Government Human Resource Information System (GHRIS) allow KRA to track payments made to contractors, suppliers, and public employees. This helps ensure taxes are properly declared from government-related income.

 With global cooperation through CRS and strong local digital systems, tracking offshore bank accounts has become more effective than ever. While some loopholes still exist, the combination of international data sharing and domestic monitoring tools is making it increasingly difficult to hide money from tax authorities.

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