Proposed law to give State more powers to nab money launderers

MONEY & MARKET |

A Ferrari and a Bugatti Veyron, part of a collection of luxury cars owned by Teodoro Obiang and confiscated by the Geneva prosecutor's office, Switzerland, September 2019. [Reuters]

In May last year, the Ethics and Anti-Corruption Commission (EACC) obtained orders freezing the assets of Migori Governor Okoth Obado and members of his family in an investigation over alleged corruption.

In the case that is currently ongoing, the EACC accuses Mr Obado of using his children and a network of proxy companies to fraudulently acquire Sh73 million in public funds between 2013 and 2017.

The assets, including two Toyota Land Cruiser vehicles and an upmarket residence in Loresho, were frozen for six months to give the prosecution time to build its case.

The governor and his children are said to have supplied goods and services to the county government through various companies.

“The monies were subsequently spent on tuition fees for the children, two high-end vehicles and a residential property located in Loresho Ridge Nairobi,” said the EACC in a statement last year spelling out the charges.   

However, the case involves Sh1.9 billion in public funds allegedly acquired from Migori County through corrupt means during Obado’s watch.

The embezzlement is alleged to have been committed with the aid of proxy companies and associates, and it will prove a daunting task for authorities to recover the cash.

Earlier this year, the African Development Bank blacklisted the firm Mactebac Contractors and its director, Joram Opala, for three years over fraud in a Sh1 billion construction project.

Mr Opala is one of Obado’s aides and was charged alongside the governor and 12 others by the EACC. 

The case against the Migori governor is one of several recent high-profile investigations that have cast the spotlight on the effectiveness of Kenyan authorities to investigate and prosecute financial crime.

A new Bill in Parliament now seeks to give the government more powers to investigate people suspected of engaging in money laundering, carry out electronic surveillance on them and seize their assets even before they go on trial.

The Proceeds of Crime and Anti-Money Laundering (Amendment) Bill, 2021 further proposes suspending the right to privacy under Article 31 of the Constitution for people suspected of violating the law.

“Where a person is suspected or accused of an offence under this Act, the person’s home or property may be searched, possessions seized, information relating to that person’s financial, family or private affairs may be revealed or the privacy of a person’s communications may be investigated or otherwise interfered with,” the draft  law says.

“A limitation of a right under subsection (1) shall apply only for the purpose of the prevention, detection, investigation and prosecution of proceeds of crime, money laundering and financing terrorism.”

The amendments put forward by Leader of Majority Amos Kimunya will give more powers to investigating authorities such as the Directorate of Criminal Investigation and the EACC powers to move on individuals suspected of money laundering in early stages of investigations.

Currently, casinos, real estate agencies, firms dealing with precious stones or metals, accountants and non-governmental organisations are listed as reporting institutions.

Reporting institutions are required to continuously monitor complex, unusual, suspicious or large transactions and pay attention to unusual patterns, which should be forwarded to the Financial Reporting Centre.

Accountants, for example, are required to inform authorities where suspected proceeds of crime and money laundering are used in transactions involving the creation of new companies or in mergers and acquisitions.

The Proceeds of Crime and Anti-Money Laundering (Amendment) Bill, 2021 now expands the same reporting obligations to advocates, notaries and other independent legal professionals who are sole practitioners.

This creates a new layer of compliance upon lawyers who are often involved in the crafting of deeds for companies and trusts often used by people to hide their ill-gotten wealth. 

If passed, the new law will further establish an oversight board chaired by the Attorney General that will oversee and advice the Assets Recovery Agency (ARA) in its functions.

Members of the board will include the principal secretary in the Ministry of Finance, Director of Public Prosecutions, Director General of the National Intelligence Service, and the Director of the Directorate of Criminal Investigations.

The oversight board will further have the mandate to lead ARA on asset recovery, approve its annual budget, annual reports and expenditure.

The law gives the Financial Reporting Centre powers to stop transactions reported to authorities such as the Competition Authority of Kenya and the Capital Markets Authority if the transactions are suspected to be tainted with laundered money.

“The centre may, for purposes of achieving the objectives of the Act, direct the reporting institution or person, in writing, not to proceed with the transaction or proposed transaction or any other transaction in respect of the funds or property affected by that transaction or proposed transaction for a period not exceeding five working days,” the proposed amendments say.   

The five-day moratorium is expected to allow the centre to make the necessary inquiries concerning the transaction and where appropriate, inform and advise investigating, regulatory or tax authorities.

If approved by Parliament, the amendments will be the most significant changes to the country’s Proceeds of Crime and Anti-Money Laundering Act, 2009.

The latest report from EACC indicates that the government recovered Sh12.1 billion in public assets and confiscated another Sh9.3 billion believed to be proceeds of crime and money laundering in the 2019-20 financial year. 

“Eighty-eight illegally acquired public assets with an estimated value of Sh25.3 billion were traced and the recovery process is ongoing,” said EACC in the report.

“In addition, 31 proactive covert investigations were conducted, averting possible loss of public funds estimated at Sh10 billion.”

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