NATION MEDIA GROUP MONDAY JULY 18 2016
Some of the vehicles on sale at a yard on Ngong Road in Nairobi on May 16, 2016 that Kenya Revenue Authority officials are investigating for import duty evasion. Two KRA staff were suspended in 2013 as 1,000 logbooks, believed to be in circulation, remained at large. PHOTO | SALATON NJAU | NATION MEDIA GROUP
A vicious motor vehicle logbook cartel is denying the taxman billions of shillings in customs revenue, causing panic among motor vehicle dealers and owners and bleeding financiers huge amounts of money in defaulted loans.
The crafty network stretches into State institutions that register motor vehicles, painting a picture of a syndicate hard to break.
It makes parallel logbooks that are admissible in lending institutions; alters records in the government motor vehicle registration database and provides alternative number plates for smuggled cars.
The Kenya Revenue Authority (KRA) says besides the 124 cars it listed as having been registered illegally and evaded paying about Sh500 million taxes, more than 300 others exist.
The acting commissioner in charge of investigations and enforcement told the Nationthe cartel even registers vehicles using other people’s data, risking Kenyans’ records in a fraudulent smuggling network.
“Among the issues identified are cases where persons whose names we published in the local dailies as being the registered owners have presented themselves and denied ownership,” the KRA boss wrote back in an email.
“This can only indicate that there are car dealers who are fraudulently using other people’s details and documents to register vehicles that they later sell to unsuspecting Kenyans. One particular person has eight vehicles registered under his name but acknowledges ownership of only one.”
MANIPULATING DATA
This means one can easily find themselves fixed in a car ownership — for a smuggled vehicle, mostly stolen abroad — without ever owning one.
The cartel also manipulates data at the Registrar of Motor Vehicles. One amusing case involves a motor vehicle registration with number KBV 372R.
The Audi, which is parked at the Kabete Police Station and was used as collateral for a Sh1 million loan from Meridian Acceptance Ltd, has been "baptised" thrice in the database — first as a lorry, then as a sport utility vehicle and again as a truck — all in under 60 days!
Trouble began when the borrower, a Congolese national, defaulted on the loan. The lender, who had duly conducted a search in the KRA system and found the ownership documents to be genuine, could not transfer the SUV because it had been "converted" into a lorry.
The first search, on February 8 this year, showed the registration was for a black Audi Q7 station wagon manufactured in 2007, chassis number WAUZZZ4L6D027998 and registered to the Congolese with the number KBV 372R.
A second search, on April 19, brought up a completely different result: The details were for a white Leyland truck with chassis number MB1DTJCC0DRCH205.
MULTIPLE REGISTRATIONS
The National Transport and Safety Authority (NTSA), which took over vehicle registration from the KRA in March, admitted in a letter to Meridian Acceptances that the fraudulent change of records was made in their systems.
“The number plate KBV 372R was registered with us on 8th July 2013 and allocated to a Leyland truck belonging to Kalpatura Power Transmission Limited,” read the April 19 letter signed by NTSA Director for Registration and Licensing Jacqueline Githinji.
“However, on May 12, 2014, a fraudulent entry was made in our system which deleted the details of the lorry and imposed the chassis number belonging to an Audi Q7 belonging to Jean Paul Ilunga Civuila and a logbook issued.
“As per our records, the genuine vehicle details for KBV 372R indicate it is a white Ashok Leyland truck. Any other vehicle holding that registration is not genuine.”
Meridian Acceptances Managing Director James Ndwiga said the response came as a shock to him, having seized the vehicle in readiness to dispose of it in a bid to recover the money owed to him.
But his shock did not end there. On his way from the NTSA offices, Mr Ndwiga spotted yet another vehicle, a Subaru Outback, with the same registration numbers on Uhuru Highway.
MORE CASES
In disbelief, the businessman called one of his staff to verify what he was seeing. He followed the car to Kangemi and alerted a policeman, who escorted it to the Kabete Police Station.
“I was shocked by what I saw because, apart from the lorry I had been told about, here was another car with the same registration number,” said Mr Ndwiga.
“The police are still looking at the two vehicles but my loan remains unpaid while this remains a big threat to asset lenders and vehicle owners who can no longer be sure of their car ownership.”
Ruling out counterfeiting, he stated: “The logbooks are genuine; so we can’t talk about River Road here.” The female driver caught with the Subaru has reportedly gone missing.
The Nation has since received 20 such cases — where logbooks were used to secure funding and parallel ones to transfer the vehicles to unsuspecting buyers.
In one incident, a motor vehicle was used to borrow money while it was still at a seller's yard, awaiting a buyer. The owner was shocked when auctioneers showed up with parallel documents intending to sell the car, but he was lucky because he had transferred the ownership to his name a few days earlier.
Curiously, the logbook serial numbers fall within the ‘S’ and ‘R’ series that the KRA reported lost in June 2011 and January 2012, respectively.
FRAUD HITS BANKS
Two KRA staff were suspended in 2013 as 1,000 logbooks, believed to be in circulation, remained at large. One batch has numbers S172501-S173000 and the other S363501-S364000.
Although banks held back from divulging the extent to which they have been hit by the fraud, they are said to be the biggest victims of the syndicate.
Five vehicles on the taxman’s list of 124 suspected to have been fraudulently registered were registered to commercial banks.
This means the vehicles, most of whose owners defaulted on their loans, were fraudulently used to borrow money from lenders.
Equity Bank, Family Bank, Sidian Bank and the collapsed Imperial Bank were caught up in the ownership of cars with questionable documentation.
The Central Bank of Kenya’s first-quarter industry report showed a 15.8 per cent rise in non-performing loans to Sh170.6 billion in March, compared with Sh147.3 billion in December, for banks that largely admit logbooks as security.
The syndicate now threatens to bring down the growing car sales market, with buyers opting to import directly and process documentation themselves.
A separate car number plate-making cartel operates on Kirinyaga Road in Nairobi. But despite the Nation’s exposé last month, no crackdown on the cartel has been reported, depicting their resilience.
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