CMA moves to stop money laundering
Companies licensed under the Capital Markets Act will be required to obtain and maintain proper identification of clients as the regulator moves to prevent, detect and control possible money laundering in the capital markets. Draft guidelines on prevention of money laundering in the capital markets published by the CMA state that the companies must in all circumstances identify beneficiaries or owners who control securities accounts.
They will be required to verify identities of clients, permanent or occasional, before or in the course of transactions and decline transacting with those who fail to identify themselves adequately.
“Boards of directors of a licensed or an approved entity shall ensure that the management puts in place appropriate measures to determine whether to proceed with a business transaction where initial checks give rise to suspicions that the information provided is false and to ensure appropriate reports are made to the Financial Reporting Centre where the entity decides to proceed with transaction,” the guidelines state.
Licensees will be barred from maintaining anonymous or fictitious accounts, and will be required to monitor transactions coming from countries known for drug and human trafficking, gun running and related crimes as well as verification of numbered accounts with a view to disclose beneficial owners or controlling persons behind nominee accounts.
“For large or unusual investments, a written statement from the client confirming that the investments are legal and consistent with the goals and objectives of the client’s reasonable and normal business activities, and for large or unusual foreign transactions, a written confirmation from the client indicating the nature, reason and appropriate details of the foreign transactions sufficient to determine the legitimacy of such transactions,” the draft reads.
Compliance officers must report suspicious transactions to the FRC, which is set to be established once the Bill published by Finance minister Njeru Githae goes through. The Anti-Money Laundering Advisory Board Centre approved it in April. Licensees must undertake periodic or ad hoc reviews of existing customer records to determine the need for re-classification of a customer as high or low risk.
The CMA will revoke licenses and prescribe penalties for those breaching the capital markets Act once the law is gazetted in slightly over a month after public scrutiny. The law affects stockbrokers, investment banks, financial advisers and other licensees under the capital markets Act.