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Law on dirty money is just the start

MOTORING
By | December 16th 2009

By Timothy Makokha

It comes as a breather seeing Parliament pass the Proceeds of Crime and Anti-Money Laundering Bill after a four-year hiatus.

This new law now recognises money laundering as a criminal offence and defines a raft of measures to fight the offence including identification, tracing, freezing, seizure and confiscation of proceeds of the crime.

But this also presupposes the existence of political will and capacity for implementation of those laws.

Coming within days of marking the International Anti-Corruption Day on December 9, the new law is particularly important to Kenya in as far as reclaiming the country’s lost growth opportunities due to corruption is concerned.

Kenya has suffered a history of corruption with gunrunning, drug and human trafficking finding a haven within the borders. Yet, efforts to enact anti-money laundering laws in each of the two previous sessions of Parliament failed.

This is despite the fact that Kenya has signed and ratified all of the United Nations Conventions on combating Money Laundering and the Financing of Terrorism.

The failure to enact this law, coupled with rising crime, drug trafficking, international terrorism and the illicit arms trade in the country has kept Kenya in the crosshairs of the international community.

Even though Kenya had long criminalised money laundering under the Narcotics Drugs and Psychotropic Substances (Control) Act No. 4 of 1994, failure to have an Anti-Money Laundering Law has been cited as a possible reason behind the country’s inability to attract foreign direct investments, despite having a relatively well developed financial system.

And so, when last week Parliament passed the Proceeds of Crime and Anti-Money Laundering Bill, albeit belatedly, it marked the first step towards purging the economy off soiled money.

Numerous challenges

A successful fight against money laundering — a crime known to fan and profiteer from other crimes — however, takes more than enacting a specific law.

The challenges of fighting dirty money range from the definition of money laundering to the processes taken to fight the crime. Although different countries define money laundering differently in their law books, it is critical that any useful definition recognises that crime of any nature is an act against society and as such, to launder any proceeds from unlawful activity or the contravention of any law followed by laundering should be encompassed in the definition.

The definition of money laundering that cover any unlawful activity would be well inclusive and would provide law enforcement with a wider legal arm.

Of course in Kenya, the harder bit would be tracing the source of suspect money or monitoring suspicious transactions.

The anti-money laundering laws place a requirement for institutions to report suspicious transactions. But the success of reporting also depends on access to information about business entities and the persons behind them.

In his paper, Money Laundering Patterns In Kenya, Mr George Kegoro, the Executive Director of International Commission of Jurists (ICJ-Kenya) says the quality and nature of public record keeping concerning the registration of business entities has direct implications for money laundering in the country.

Missing files

Previous searches on entities involved in shadowy transactions, however, have proved not just odious, but futile in most cases. Files on such business entities have either been reported missing or vital information has been kited away.

The country’s manual registry also makes it rather simple for crooks to cart away any files that would link them to murky business deals without as much of a trace.

Kegoro says the registry has collapsed under the weight of its own inefficiencies and corruption. This must be sorted out before the Anti-Money Laundering Law can even take off.

There is also the tendency for money launderers to operate cross-border schemes calls for anti-money laundering regimes that are in tandem in terms of speed, scope and standards for detection and law enforcement.

The existence and membership to regional anti-money laundering alliances is critical to checking cross-border crime.

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