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Money laundering Bill kicks up storm in Parliament

NATIONAL
By Roselyne Obala | December 8th 2021

A bid to amend the proposed legislation to seal loopholes exploited by firms and individuals to launder money or make suspicious transactions has elicited mixed reactions in the National Assembly.

Although the Proceeds of Crime and Anti-Money Laundering (Amendment) Bill, 2021 sponsored by National Assembly Majority Leader Amos Kimunya sailed through the Second Reading in a charged debate, those opposed raised fundamental issues of its legality.

The MPs questioned the constitutionality of the Bill and faulted the inclusion of lawyers as reporting persons, arguing that it exposes their confidentiality with clients.

MPs Otiende Amollo (Rarieda), George Murugara (Tharaka), Aden Duale (Garissa Township) Patrick Musimba (Kibwezi West) raised preliminary objections seeking temporary Speaker Christopher Omulele's (Luanda) ruling on the matter before, the mover proceeds.

But those in support, led by Mr Kimunya (Kipipiri) and the Finance and Planning committee chair Gladys Wanga (Homa Bay County) maintained that the Bill will enhance vigilance in the financial sector and seal loopholes used by money launderers.

They also warned that failure to enact the law by January could see Kenya fail in her internal obligation and risk being greylisted and proceed to the black list in the international financial system.

“The Eastern and Southern Africa anti-money laundering group of 18 members have passed the law except for Kenya and Somalia. All countries in East Africa Community and Comesa have done the same, why are we different?" posed Ms Wanga.

Kimunya give an update of a financial action task force report that identified the legal profession in Kenya as high risk, noting that between 2012 and September 8, 2021, the number of suspicious transactions were lawyer-assisted, stood at 579 while 326 transactions were by lawyers.

“This number is growing. We are not talking about lawyers being included from the blues. All they need to do is report suspicious transactions by clients, it will be flagged by Financial Reporting Centre (FRC). They handle clients’ transactions innocently, what they don’t know is that they are proceeds of crime,” he explained.

Ms Wanga cautioned that Kenya is under an international obligation to pass the law by January 2022, arguing that what the lawyers will be reporting are not active litigations in court by transaction activities.

This requires that parties while acting for their clients in circumstances such as buying and selling of real estate; managing of client money, securities, or other assets; organisation of contributions for the creation, operation or management of companies; and creation, operation or management of buying and selling of business entities make the disclosure.

“Litigation is not listed as activity the reporting person needs to report. We are guarded by the international financial Action taskforce report forwarded by the United Nations Security Council (UNSC) where Kenya has a seat as a non-permanent member,” said Wanga.

We entered into the international obligation with our eyes wide open. If we don’t pass by January we will be in the grey list, progressing to the black list, and any transactions outside the country will attract high scrutiny,” she added.

But Mr Duale, Mr Otiende, and Mr Murugara termed the Bill discriminating and touches on legal issues of client/advocate confidentiality and wondered why Kenya was bowing to external pressure and legislating on laws that infringe on the Constitution.

“Why only advocates added to accountants. The issues of advocates are already provided for in the Act Section 2, it gives the National Treasury Cabinet Secretary discretion to allow such other professions in which such risk of money laundering as he/she may advise of the FRC declare," argued Otiende.

“It is not only discriminating the advocates but burdensome and infringes on the rights to hold client information confidential. It even seeks to avail family information. It is not justifiable in an open and democratic society,” he added.

If approved, the proposed law will widen the scope of the reporting requirement such as advocates, notaries, and other independent legal professionals who are sole practitioners, partners or employees within professional firms so that the obligations to monitor complex unusual, suspicious, large or other transactions and to report any transactions that constitute or may be related to money laundering as provided for in the current Act.

But Otiende said independent legal practitioners are not mentioned anywhere in the laws.

“The Bill has introduced a new term not known in the law, the Advocates Act, the Law Society of Kenya (LSK) Act. Whatever it is, it is not defined in law,” he criticised.

Duale stated: “These proposed amendments violate Articles 31, 48, 49 and 50 of the Constitution to a fair hearing and the basic principles of privacy by intercepting communication.”

He warned that if the Bill sails through, next they will be legislating to allow a doctor to violate the right of a patient by exposing their medical history.

“This is the third attempt at passing this law. It was first tried in 2019 through the Finance Bill and later expunged, it was returned through the Statute Miscellaneous (Amendment) Bill in 2020 and the Speaker expunged it, now it has been brought through substantive legislation,” said the Garissa Township MP.

“We are told it's pressure from outside, it doesn’t happen in other democracies. I don’t know why this poison is not leaving the corridors of Parliament,” he added.

Duale, Murugara, and Otiende called for the withdrawal of the Bill.

“We risk legislating on unconstitutional law that will be struck out and declared null and void by the courts,” said the Tharaka MP.

The Bill seeks to introduce provisions that will limit the right to privacy enshrined in the Constitution in relation to the prevention, detection, and investigation of money laundering and financing of terrorism.

It will also be seeking to give the FRC authority to interrupt a transaction for not more than five working days where there is evidence of suspicious activity taking place as it will give adequate time to investigate the transaction.

This means it will empower the Central Bank of Kenya's FRC to freeze transactions for five days before investigations and without a court order or seize property.

The Bill proposes the introduction of the asset recovery oversight board. The Board will hold the agency accountable and will have the authority to constitute committees to ensure that this mandate is achieved.

MPs Kimunya, Peter Kaluma (Homa Bay Town), Wanga, Emmanuel Wangwe (Navakholo), David Sankok (Nominated) backed the Bill, saying it will restore Kenya’s dented image.

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