Ruto's plan to beat money launderers, terror funders

Kenya Kwanza will empower state agencies to better fight illicit cash flows

In Summary

• Enforcement groups will include stakeholders from ministries and agencies.

• Central Bank will be empowered to disclose any info on anti-money laundering actions. 

A cashier at a Nairobi forex bureau counts dollars and shilling notes/
A cashier at a Nairobi forex bureau counts dollars and shilling notes/
Image: FILE

President William Ruto’s administration has proposed tough laws to counter the proliferation of illicit cash and funding for terrorism activities.

Despite raising the threshold for reporting large cash transactions to Sh2 million, Kenya Kwanza has proposed a tough regime for people  who may be implicated in money laundering and terrorism-financing crimes.

The measures have been spelled  out in the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023 sponsored by Majority leader Kimani Ichung’wah.

The proposed law has been approved by Cabinet and is now before MPs.

For starters, Ruto seeks to grant operational independence to the Financial Reporting Centre.

FRC is currently under the Attorney General’s office, hence, it is not   in conformity with the recommendations of the Financial Action Task Force Standards.

The Kenya Kwanza administration has thus sought to arm state agencies to better fight illicit cash flows.

These include the Capital Markets Authority, the Insurance Regulatory Authority, the Central Bank of Kenya, the police and the EACC.

Ruto’s team further seeks to widen the enforcement groups to include the Interior and Foreign Affairs ministries, the Assets Recovery Agency and the National Treasury.

Others are the Office of the Attorney General, NIS, DCI, the Immigration department, KDF, Kenya Maritime Authority and KRA.

Also to assist are the Kenya Airports Authority, NGO Coordination Board and the National Counter-Terrorism Centre.

The Bill would require hefty  fines for violations relating to money laundering and terrorism financing.

“A person who violates or fails to comply shall be liable to a penalty not exceeding Sh20 million, in case of a legal person,” the proposed law reads.

“Sh1 million for a natural person and Sh100,000 for each case and day during which the violation continues.”

As an investigative technique, the police would allow illicit or suspect consignments to pass out through and into the territory of Kenya “with a view to investigating an offence and the identification of persons involved in the commission of the offence”.

If approved by MPs, banks and other reporting institutions would be compelled to conduct due diligence on their customers, both new and existing ones.

The Know Your Customer rules are also being enhanced so institutions identify a customer, whether permanent or occasional, with greater scrutiny.

Customers would thus be required to produce an official record “reasonably capable of establishing the true identity of the applicant or customer”.

Banks would thus ask one for their certificate of birth, a national identity card, a passport, a driver’s license or any other official means of identification.

For companies, evidence of registration or incorporation, the Act establishing the body corporate, a corporate resolution authorising transactions with latest annual returns, would be required.

“A reporting institution shall undertake customer due diligence on the existing customers and clients on the basis of materiality and risk,” the Bill reads.

“[It shall take] into account whether the customer's due diligence measures have previously been undertaken and the adequacy of data obtained.”

In the new dispensation, the Central Bank would be empowered to disclose any information on anti-money laundering, counter-terrorism financing and countering proliferation financing to any monetary authority.

It shall also report to any fiscal or tax agency, fraud investigations agency, its foreign and domestic counterparts or the Financial Reporting Centre  when required. 

The other regulatory agencies would be empowered to regulate, supervise and enforce compliance with anti-money laundering and combating financing of terrorism laws.

The agencies are being given more powers to vet proposed significant shareholders, beneficial owners, directors and senior officers of institutions under their purview.

The authorities have also been empowered to conduct on-site inspections of institutions and conduct surveillance of their operations.

The Bill allows the regulators to “compel the entities to produce any document or information it may require for supervising the entities in line with the anti-money laundering and proceeds of crime laws”.

Authorities would also impose monetary, civil or administrative sanctions for any violations of the laws regulating illicit financial flows.

The Insurance Regulatory Authority, for instance, has been empowered in the proposed law to supervise insurance firms and their agents and to keep the records for five years.

The checks would apply to insurers, reinsurers, insurance brokers, insurance agents, insurance surveyors, risk managers, loss assessors, loss adjusters or claims settling agents.

CBK has been armed to conduct surveillance of banks and their agents, mortgage finance companies, mortgage refinance companies, microfinance banks and their agents.

The banks' regulator would also check money remittance providers and their agents, forex bureaus and their agents, digital credit providers, payment service providers or any other licensed entity.

In the new dispensation, offences involving the laundering of proceeds of corruption would be an economic crime.

An institution that detects a transaction involving proceeds of crime would have two days to report its suspicions to the FRC.

“The centre shall specify the manner in which the suspicious transaction, activity reports and cash transaction reports shall be filed,” the Bill reads.

FRC will also flag high-risk countries with poor anti-money laundering checks or those listed by the Financial Action Task Force Standards.

In efforts to counter terror funding, a reporting institution shall monitor any transactions or activities in relation to terrorist property and shall immediately report any suspicious or unusual transaction or activity to the FRC.

“FRC and supervisory bodies shall have the power to supervise and enforce the application of preventive measures to combat the financing of terrorism and financing of proliferation acts by reporting institutions,” the proposed law reads.

EACC would be granted access to relevant information relating to money laundering and terror financing.

Companies of any kind, including those owned by foreigners, shall also be required to furnish the registrar of companies with a copy of the register of the beneficial owners.

Reports shall include details of the managers, partners and employees. “A limited liability partnership shall enter in its register of beneficial owners  information relating to its beneficial owners.”

The proposed law further imposes hefty punishments for persons who support terrorists by providing forged or falsified travel documents or facilitating shelter, clothing and communication devices.

To ease the handling of terrorism and money laundering suspects, the state has simplified the procedures of extradition of fugitive criminals.

“Fugitive criminals being sought by a requesting state would be allowed consent to be extradited without conducting formal extradition proceedings,” the Bill reads.

The consent will be recorded by a magistrate and may not be revoked, the rules read.

President Uhuru Kenyatta’s administration included lawyers and saccos to be part of the reporting institutions governed by anti-money laundering law and also allowed intrusion into the phone records of suspects.

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