February 24, 2009: The cost of corruption to Kenya is difficult to quantify – but it no doubt runs into billions of shillings annually. This, coupled with monies lost through drug-trafficking, fraudulent public procurement processes and other forms of criminal activity is a cost that Kenya can ill-afford.
Monies obtained through illegal activities must eventually find their way back into the economy. The process of “cleaning” up “dirty money” and redirecting it back into the economy as bona fide funds is what is known as money laundering. These are monies that should have been directed towards public projects, building roads or even feeding the starving populace.
And yet to date, Kenya lacks a comprehensive law to deal with the proceeds of money from criminal activity. The lack of such laws only serves to abet crime and ensure that monies obtained from criminal activity easily end up in the pockets of the persons responsible for the criminal activities as “clean money”.
If our Legislature is as committed as it claims to be about combating fiscal criminal activities, then it is about time that water-tight laws were enacted to combat money laundering and proper systems to enforce the laws were put in place.
In April, 2008, the Kenyan legislature published the long awaited Proceeds of Crime and Money Laundering Bill, 2008, (the “Bill”).
The publication of the Bill was received with mixed reaction but almost a year down the line, the Bill is yet to be enacted into law. The Bill seeks to create a comprehensive legislative framework to combat money-laundering in Kenya.
At present, money laundering legislation in Kenya is weak and fragmented. Money laundering is primarily dealt with under the Narcotic Drugs and Psychotropic Substances (Control) Act, 1994, which deals with proceeds of drug trafficking and the Central Bank of Kenya Guideline on Proceeds of Crime and Money Laundering (Prevention) which only applies to banking institutions licensed under the Banking Act.
The Bill, which repeals the anti-money laundering provision in the Narcotics Act, is intended to apply to all persons whether individual or corporate and to the proceeds from any criminal activity.
The definition of “money laundering” under the Bill is wide and includes entering into a transaction involving property, which one knows or ought to know or suspects is or forms part of the proceeds of crime.
It also includes dealing with property in a manner that conceals the nature or ownership of the property or assisting a person who has committed an offence to avoid prosecution or concealing any proceeds of crime.
The Bill makes
money laundering a criminal offence. Other related offences include assisting someone to benefit from
proceeds of crime, possessing or using
proceeds of crime and failing to report suspicion of
proceeds of crime.
Offences under the Bill attract a 14-year jail term and/or a maximum fine of Sh5 million in the case of an individual and Sh25 million for a body corporate or the value of the
property involved in the offence, whichever is higher.
The Bill provides for the criminal
forfeiture of the
proceeds of crime including implementation of
confiscation orders, restraint orders and the appointment of a receiver. It also provides for civil
forfeiture of
property including civil proceedings for recovery of
property.
Under existing law, there are no criminal sanctions for
money laundering of proceeds from criminal activities apart from the criminal sanctions for drug trafficking.
In addition, although under the CBK Guideline banking and financial institutions are under an obligation to report suspected
money laundering, there are no provisions stipulating what happens to persons who commit
money laundering.
The Bill establishes several bodies which include:
-A Financial Reporting Centre, whose role is to assist in the identification of the
proceeds of crime and the combating of
money laundering.
The Centre is charged with the duty of receiving and analysing reports of suspicious transactions and sending such reports to the relevant law enforcement authorities for action.
- The Anti-
Money Laundering Advisory Committee whose function is to advise the Director of the Financial Reporting Centre on the performance of his functions; and
- The Asset Recovery Agency whose role includes the recovery of
property which forms the
proceeds of crime.
The Bill grants police officers and the Agency extensive information gathering powers including powers of entry, search and
seizure. It also sets up the Criminal Asset Recovery Fund and provides for international assistance in investigations and proceedings.
Reporting institutions (that is, financial institutions and designated non-financial businesses including casinos, real estate agencies, legal practitioners and accountants) are obliged to monitor and report to the Financial Reporting Centre suspected
money laundering activities, verify customer identity, establish and maintain customer records and establish and maintain internal reporting procedures.
Supervisory bodies (such as the Central Bank of Kenya, the Insurance Regulatory Authority, the Capital Markets Authority, professional bodies such as the Institute of Certified Public Accountants of Kenya and the Law Society of Kenya and the Retirement Benefits Authority) are also obliged to report suspicious activities to the Centre.
The reporting threshold for reporting institutions is put at US$10,000. This means that a reporting institution would have to report to the Centre any suspicious transaction whose value is or exceeds US$ 10,000.
Criminal Offence
It is noteworthy that the Bill overrides any obligations of secrecy or disclosure imposed by any law and grants reporting institutions which perform any act in good faith and in furtherance of their obligations under the proposed law immunity from legal proceedings.
This is designed to encourage whistle-blowing.
Conversely, the failure by a Reporting Institution to report suspicious activities is a criminal offence.
It would therefore be critical for Reporting Institutions to set up appropriate structures within their organisations which enable them to understand the source of funds that may be paid to them, the identity of the person paying the funds and to take into consideration any other factors which should put them on notice of suspicious activity.
The Bill applies extra-territorially and the conduct of a person outside Kenya will constitute an offence if the conduct would constitute an offence under Kenyan law had it occurred in Kenya. As such, offences under the Bill are extraditable offences.
Enactment of the Bill could also go a long way in dealing with some of the concerns raised in relation to the mobile payment services.
It is therefore high time that the Kenyan legislature retrieved the Bill from the parliamentary shelves where it gathers dust, debate it, take into account any legitimate concerns from the financial fraternity in particular, make necessary amendment and then pass the Bill into law.
Kiunuhe is an advocate in Nairobi.
ak@africalegalnetwork.com
