Kenya risks sanctions on cash handling rules

Kenya is a member of the Eastern and Southern Africa Anti-Money Laundering Group.

Kenya now risks being declared a hub for money laundering after Parliament thwarted a bid to compel lawyers to report on clients’ money that they handle.

This as MPs failed to amend Proceeds of Crime and Anti-Money Laundering Act.

The proposal sought to designate lawyers, notaries and other independent legal professions as part of reporting entities to whom anti-money laundering/combating financing of terrorism (AML/CFT) controls would apply.

Yesterday, the Financial Reporting Centre (FRC) boss Saitoti Maika warned that Kenya might be cited by the Financial Action Task Force (FATF) for non-compliance, leading to sanctions.

FATF is an inter-governmental body whose mandate is to set standards to promote the effective implementation of legal, regulatory and operational measures for combating money laundering and terrorism financing.

“Where the FATF deems a country not to be fully implementing the FATF standards, it can call upon the international community to apply counter-measures on that country. The risk we therefore stand as a country is for Kenya to be singled out as a high risk jurisdiction and a perceived safe haven for money laundering/terrorism financing,” Mr Saitoti said.

He added: “This will erode Kenya’s financial sector market reputation. The question we therefore need to pose and ask ourselves is, do we wish to earn Kenya this tag?”

Saitoti said the proposed amendments were expected to provide a legal basis for lawyers to report to the FRC any suspicious transactions being undertaken by their clients.

Terrorism financing

“This will not only support the lawyers but also support other organs in fighting money laundering and terrorism financing,” he said.

Last month, the National Assembly Speaker expunged clauses 50 and 51 of the Finance Bill, saying they did not comply with the Constitution and that the right procedure had not been followed.

The FRC had explained that Kenya’s legal regime for combating money laundering, terrorism financing and proliferation did not meet international standards due, in part, to the non-inclusion of lawyers as part of the reporting regime.

The Law Society of Kenya had voiced concerns that the proposed amendments could infringe on advocate-client confidentiality.

Kenya is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) whose purpose is to combat money laundering, terrorism financing and proliferation of weapons of mass destruction by implementing FATF recommendations in eastern and southern Africa.

Kenya is required to provide annual updates to the ESAAMLG on the steps it is taking or has taken to address deficiencies in its AML/CFT regime.

As part of its enhanced follow-up procedures, ESAAMLG may refer its members to the FATF for inclusion in the FATF’s International Cooperation Review Group process.

ESAAMLG has a membership of 18 countries namely, Angola, Botswana, Ethiopia, Kenya, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Rwanda, South Africa, eSwatini (formerly Swaziland), Seychelles, Tanzania, Uganda, Zambia and Zimbabwe.

Only Kenya and Mozambique have not designated lawyers as reporting entities as part of the AML/CFT reporting regime.