PROCEEDS OF CRIME

Lawyers to reveal financial deals with clients in proposed law

They will be among persons answerable to the Asset Recovery Agency.

In Summary
  • They will report their clients when buying and selling real estate, clients’ money and assets they are managing as well as bank, savings and securities.
  • Lawyers opposed similar plans when the state in the Finance Bill, 2019, proposed that they disclose their client’s transactions.
Senior counsel John Khaminwa reads the Constitution before the appeals court on the ruling of the BBI on August 20, 2021
Senior counsel John Khaminwa reads the Constitution before the appeals court on the ruling of the BBI on August 20, 2021
Image: EZEKIEL AMING'A

Lawyers would be required to report their clients' cash deals in fresh efforts by the government to bolster the recovery of proceeds of crime.

A bill sponsored by National Assembly Majority leader Amos Kimunya seeks to amend the law to compel lawyers to disclose details of their client’s financial transactions to the authorities.

The Proceeds of Crime and Anti-Money Laundering Bill, 2021, provides that lawyers be among persons answerable to the Asset Recovery Agency.

This would apply to “advocates, notaries and other independent legal professionals who are sole practitioners, partners or employees within professional firms”.

“The obligations shall apply to the advocates, notaries and other independent legal professionals when preparing or carrying out transactions for their clients,” Kimunya says in the bill’s memorandum.

Lawyers would therefore report their clients when buying and selling real estate, clients’ money and assets they are managing as well as bank, savings and securities.

Legal professionals will also be under obligation to disclose how much their clients have contributed to the creation, operation and management of companies.

The new anti-corruption law further seeks to trace monies lawyers’ clients have used in buying and selling business entities. Lawyers opposed the plans when the state in the Finance Bill, 2019, proposed that they disclose their client’s transactions.

Law Society of Kenya officials at that time said the proposed law “substantially affected the practice of law, rule of law and administration of justice”.

“The subject of legal professional privilege or advocate-client privilege is cemented under the law by the evidentiary rule of privilege under the law of evidence and common law principle adopted under the Judicature Act,” the LSK said in a memorandum submitted to Parliament at that time.

Lawyers further stated that the proposed amendment “impacted several legal principles, practices and laws”, citing emerging issues to include "confidentiality, the role of lawyers, constitutional rights, evidentiary rules, criminal law principles and procedures, and the self-regulation of professional bodies”.

In the petition signed by then-LSK boss Allen Waiyaki and lawyer Tom Ojienda, the lawyers were categorical that they “are neither agents nor officers of the Director of Criminal Investigations and by extension, the Inspector General of Police nor the Financial Reporting Centre (FRC)”.

Lawyers further held that “illegal disclosure of client’s information is fatal to the advocates' profession and business as it could expose advocates to disciplinary proceedings, withdrawal of practicing license, and removal from the Advocate’s Roll.”

If the bill is passed by MPs, the FRC will pounce on any person or institution where there are any “reasonable grounds to suspect that a transaction or proposed transaction may constitute money laundering or related activities.”

This will also apply to Saccos which would be under obligation to report any transactions suspected to be arising from illicit cash sources.

The bill in this respect seeks to include the Law Society of Kenya and Sacco Societies Regulatory Authority as supervisory bodies for purposes of reporting proceeds of crime.

Presently, the bodies include the Central Bank of Kenya, Insurance Regulatory Authority, Betting and Licensing Control Board, Capital Markets Authority, ICPAK, Estate Agents Registration Board, NGOs Board, and Retirement Benefits Authority.

In the new changes, the centre will come knocking if one is suspected to have acquired their wealth through proceeds of crime.

The surveillance will include “any property which is connected to the proceeds of crime or unlawful activities and related activities”.

The agency will also pursue the “proceeds of or property which is connected to an offence relating to the financing of terrorism and related activities”.

The state further seeks to go after “property owned or controlled by or on behalf of, or at the direction of, a person or entity identified or designated pursuant to the law on prevention of terrorism”.

ARA would therefore be empowered to stop any suspect transactions in respect of the funds or property affected by the flagged cash deals “…to allow the centre to make the necessary inquiries concerning the transaction,” the bill reads.

Where the centre considers it appropriate, it would “inform and advise an investigating authority, regulatory authority or tax agency”—in this case, the Kenya Revenue Authority.

In past efforts, the FRC has cited lawyers as an impediment to graft fight citing challenges with extracting information from lawyers of clients linked to cases.

The FRC believes that lawyers and their firms have been used by unscrupulous corrupt officials to hide stolen public funds citing scandals at the NYS and Nairobi county government.

The law is further being amended to deny the right to privacy to any persons suspected or accused of any offence under the proceeds of crime law.

“Where a person is suspected or accused of an offence under this Act, the person's home or property may be searched, such person's possessions may be seized, and information relating to that person's financial, family or private affairs where required may be revealed…the privacy of a person's communications may be investigated or otherwise interfered with,” the proposed law reads.

“A limitation of a right shall apply only for the purpose of the prevention, detection, investigation and prosecution of proceeds of crime, money laundering and financing of terrorism,” it adds.

In what may give ARA a free hand to prosecute its cases, the law is being changed to ensure the agency's counsel has "the same privileges as state counsels under the Office of the Attorney General, in addition to any other powers they may have under the law.”

ARA is further pushing for independent budgetary allocation during the budgeting process at the National Assembly.

“The National Assembly shall allocate adequate funds to the agency to enable the agency to perform its functions under this Act and any other written law and the budget shall be a separate vote,” the bill reads.

The government also seeks to establish an oversight board to be known as the Asset Recovery Oversight Board with a secretary appointed by the Public Service Commission.

It shall comprise of the Attorney General, Treasury Principal Secretary, the Director of Public Prosecutions, Director General of the National Intelligence Service, director general of FRC and the DCI.