Lawyers not expected to report clients' dirty deals

Parliament Buildings, Standard. [Elvis Ogina, Standard]

Lawyers, notaries, and other independent legal professionals will no longer be required to report suspicious transactions linked to the proceeds of crime and money laundering should Parliament adopt the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill 2023.

The Bill currently before the House in its third reading, states that this will, however, be on condition that the information was obtained in circumstances that are subject to professional secrecy or legal professional privilege.

The amendments were proposed by the Tharaka MP George Murugara-led Committee on Justice and Legal Affairs (JLAC) which clarified that the information referred to was that received from or obtained by the lawyer in the course of ascertaining the legal position of their client or in performing their task of defending or representing that client in judicial, administrative, arbitration or mediation proceedings.

JLAC also recommended amendments to the Prevention of Terrorism Act, to have the Law Society of Kenya (LSK) regulate, supervise and enforce compliance for anti-money laundering, combating the financing of terrorism, and countering proliferation financing for lawyers, notaries, and other legal professionals.

The Society, while undertaking its mandate, will have the powers to impose monetary, civil, or administrative sanctions for violations relating to anti-money laundering, combating the financing of terrorism, and countering proliferation financing.

LSK will also have powers to conduct an onsite inspection, compel the production of any document or information it may require for the purpose of discharging its supervisory mandate, issue regulations, guidelines, directions, rules, or instructions, share information and take such action as is necessary to supervise and enforce compliance by lawyers and notaries.

“The provisions of this section shall come into effect six months from the date of commencement of this section,” reads the amendments.

At the same time, the state will have powers to spy on your communications, raid a person’s home, and seize possessions of an individual accused of money laundering but on condition that authorities obtain a court order.

“A limitation of a right shall apply only for the purpose of the prevention, detection, investigation, and prosecution of proceeds of crime, money laundering, and financing of terrorism,” reads the amendments.

The Molo MP Kuria Kimani-led Finance Committee also proposed amendments to the Bill that would see the Central Bank of Kenya (CBK) have powers to regulate, supervise, and enforce compliance for anti-money laundering and combating the financing of terrorism. 

The amendments sought to have foreign exchange bureaus, digital credit providers, directors, officers, employers, agents, or any other person who violates or fails to comply with any provision of the Proceeds of Crime and Anti-Money Laundering Act, 2009, in case of a legal person be liable to penalty not exceeding Sh5 million.

In the case of a natural person, the penalty will not exceed Sh1 million and additional penalties not exceeding Sh100,000 in each case.

The amendments further seek to have CBK vet proposed significant shareholders, proposed beneficial owners, proposed directors, and senior officers of a reporting institution, conduct an onsite inspection, and offsite surveillance, and undertake consolidated supervision of a reporting institution and its group.

If approved, it may also wield powers to compel the production of any document or information they may require for the purpose of discharging its supervisory mandate under the Proceeds of Crime and Anti-Money Laundering Act, 2009, impose monetary, civil or administrative sanctions for violations, issue regulations, guidelines, directions, rules or instruction as well as cooperate and share information.

Notably, the development comes after the LSK signed an agreement with the Financial Reporting Centre compelling legal practitioners to report clients handling dirty money.