DCI has no authority to probe tax evasion claim, judge rules

Billionaire Humphrey Kariuki. He is facing tax evasion charges.
The High Court has dealt a major blow to the fight against tax evasion, ruling that the Directorate of Criminal Investigations (DCI) has no authority to investigate alleged tax cheats.

Justice Luka Kimaru ruled that under the tax laws, it is only the Kenya Revenue Authority (KRA) that is mandated to investigate and prosecute cases of tax evasion or instruct the Asset Recovery Authority to institute recovery of taxes.

Justice Kimaru made the ruling in a case in which billionaire businessman Humphrey Kariuki’s companies have challenged an order obtained by DCI officers to investigate and freeze their accounts.

“It is evident that there was an element of jurisdictional overreach by the DCI on matters which are statutorily under the jurisdiction of KRA and the Asset Recovery Authority. In the performance of its duties, the DCI must respect the authority of other institutions,” ruled the judge.

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Justice Kimaru also upheld an order directing the unfreezing of several bank accounts of Mr Kariuki’s companies, noting that the order to freeze the bank accounts was obtained illegally since it was never sought in the application lodged by the DCI.

The court ruled the billionaire's companies, Africa Spritis Limited and Wow Beverages Ltd, had proved the orders were illegal since the firms were never served in the first instance to present documents the investigators were looking for.

According to the judge, police investigators only have the power to ask for orders to access account details but not to ask for orders to freeze an account.

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“The Evidence Act grants a police officer investigating an offence power to access to an account held in a bank for the purposes of investigations, but it does not grant the investigating officer power to apply for the seizure, freezing or the preservation of the contents in the account,” ruled Kimaru.

He said that it was clear the application the DCI sought before the magistrate’s court at Kiambu against Kariuki’s bank accounts was not to freeze the accounts and the magistrate made a mistake in issuing an order which was not sought.

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Justice Kimaru added that in instances where the police want to investigate a person’s account, the holder of such account should be served at the appropriate time and notified of the reasons.

“In conducting investigations, the police must at all times respect the rights of those they are investigating. That right includes the right to enable those affected by the orders issued by the court to be heard,” ruled Kimaru.

He stated that it is wrong for investigators to claim they are acting to safeguard public interest when they are breaking the law.

The judge said the police cannot be allowed to benefit from an outright illegality on claims that they are acting in the public interest.

Kariuki, in his application filed through lawyer Cecil Miller, argued the order freezing his companies' nine accounts was unlawful and meant to cripple their operations after the DPP failed to link its directors to the tax evasion claims.

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He accused the DPP of acting in bad faith and abusing the court process, arguing that the decision to file the application in Kiambu was to get a favourable magistrate to rule in their favour after a similar application was declined by a magistrate in Nairobi.

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DCITax EvasionKRA