The Anti Money Laundering Amendment Act 2023 addresses the intricate process of money laundering, which involves concealing the illicit origins of funds obtained through activities like drug trafficking, corruption, embezzlement, or gambling. This process is typically carried out in three stages:
Placement: This initial phase involves introducing “dirty cash” into the legal financial system while concurrently obscuring its origin.
Layering or Structuring: In this stage, the money’s source is concealed through a sequence of transactions and accounting maneuvers. Funds are fragmented into smaller transactions, complicating the detection of laundering activities.
Integration: The final step sees the now-laundered money withdrawn from the legal account and incorporated into genuine records, making it available for the criminals’ desired purposes.
An illustrative example on Business Daily highlights the case of Felesta Nyamathira Njoroge, a 23-year-old Kenyan woman who lost over Sh126 million in US dollars sent by her Belgian boyfriend, Marc De Mesel, two years ago. The High Court ruled the funds as proceeds of crime, supporting the Assets Recovery Agency’s (ARA) claim for forfeiture to the state. The court found Njoroge unable to explain the source of the $914,967, emphasizing a potential money laundering aspect in the transaction pattern, particularly De Mesel’s failure to clarify the funds’ source.
In February 2022, the US government uncovered money laundering networks diverting COVID-19 relief funds to Kenya. Investigative agencies found that $250 million had been illicitly transferred to Kenya between February 2020 and February 2022, funding luxury purchases. Despite successful convictions in US courts, Kenya’s anti-money laundering legislation, especially the Proceeds of Crime and Anti-Money Laundering Act of 2012, reveals gaps in addressing extraterritoriality, allowing illicit fund inflows with lax regulation in banking, legal, and real estate sectors.
Key provisions of the Anti-Money Laundering and Combating of Terrorism Financing Law (Amendment) Act, No. 10 of 2023, include:
Scope of Impact: Significantly affecting economic enterprises such as Public Limited Companies (PLCs), Limited Liability Partnerships (LLPs), Private Companies (PC), and Foreign Limited Liability Companies (FLLC).
Autonomy for FRC: Granting operational autonomy to the Financial Reporting Centre (FRC), ensuring independence from the State.
Regulatory Mandate: Empowering the Authority under the Capital Markets Act Cap 485A to regulate, supervise, and enforce compliance, extending its authority over reporting institutions and proceeds of crime.
Vetting and Documentation: Granting the Authority power to vet significant shareholders, beneficial owners, and senior officers of reporting institutions, emphasizing comprehensive documentation.
Beneficial Ownership Compliance: Businesses have a 60-day window to comply with disclosing beneficial owners’ requirements, aligning with existing regulations under the Companies Act, 2015. Non-compliance may result in administrative penalties and fines.
Appointment Requirements: Private Companies with a paid-up share capital below 5 million are exempt from appointing a Company Secretary (CS) or resident director but must appoint a contact person by November 14, 2023.
Nominee Director Register: Introducing a mandatory register for nominee directors, nominators, nominees, and nominee shareholders, promoting transparency in corporate structures.
Limited Liability Partnership Amendments: Democratizing the Limited Liability Partnership Act with detailed statutory requirements for regulatory compliance. Foreign LLPs operating in Kenya must register, maintain a local office, and appoint a local representative by November 15, 2023.
Record-keeping Requirements: Companies, including foreign ones, are required to keep records of beneficial owners’ information for at least ten years from the date a person ceases to be a beneficial owner.
Public Listed Companies: Mandating public listed companies to lodge with the Registrar a copy of any amendment to their register of beneficial owners within thirty days of making the amendment.