Anti-money laundering in Kenya is governed by the Proceeds of Crime and Anti-Money Laundering Act, 2009 (POCAMLA), which sets a framework for detecting, preventing and reporting money laundering that applies to financial institutions, designated non-financial businesses and professions, and virtual asset service providers. Many non-financial businesses assume POCAMLA is a “banks only” statute. That assumption can leave a firm’s own principals exposed to criminal liability, not just regulatory censure.
Anti-Money Laundering in Kenya: Who Is a Reporting Institution
Section 2 defines a reporting institution as a financial institution, a designated non-financial business and profession (DNFBP) or a virtual asset service provider. The DNFBPs listed include casinos, real estate agencies, dealers in precious metals and stones, accountants who are sole practitioners, partners or employees within professional firms, trust and company service providers, and advocates, notaries and other independent legal professionals who are sole practitioners, partners or employees within professional firms. A law firm is therefore a reporting institution in its own right. The Cabinet Secretary may, on the advice of the Financial Reporting Centre, declare any other business or profession a DNFBP where a money laundering, terrorism financing or proliferation financing risk exists, so the list is not fixed. Section 47A also requires reporting institutions to register with the Centre.
Customer Due Diligence
Section 45 requires a reporting institution to identify and verify any applicant seeking a business relationship or transaction, and any customer, by requiring an official record reasonably capable of establishing true identity. For an individual this includes a birth certificate, national identity card, passport or driver’s licence; for a body corporate it includes evidence of registration or incorporation. Section 44(1) requires ongoing monitoring of all complex, unusual, suspicious or large transactions, whether completed or not, with attention to unusual patterns and to insignificant but periodic transactions that have no apparent economic or lawful purpose. Enhanced scrutiny is good practice for politically exposed persons, high-risk jurisdictions and transactions that do not fit the customer’s known profile. Identify the beneficial owner of any legal entity you deal with.
Record Keeping
Section 46 requires a reporting institution to keep records of all domestic and international transactions, and a record of the evidence of identity obtained. Under section 46(4), these must be kept for at least seven years, or such longer period as the Centre requires in writing, from the date the transaction was completed or the account or relationship was terminated, and made available on a timely basis to competent authorities. Records that have been archived without an index, migrated to a new system or held in a former staff member’s files are not truly available, so be able to produce the CDD documentation for any historical client within that window.
Suspicious Transaction Reporting
Under section 44(2), where a reporting institution suspects that a transaction or activity could constitute or relate to money laundering, terrorism financing, proliferation financing or proceeds of crime, it must report it to the Centre in the specified manner within two days after the suspicion arose. Section 44(3) requires all suspicious transactions, including attempted transactions, to be reported, so there is no minimum amount below which a suspicious transaction can be ignored. Lawyers, notaries and other independent legal professionals may submit reports through the Law Society of Kenya, and section 44(3A) relieves them from reporting where the information was obtained in circumstances of professional secrecy or legal professional privilege.
Tipping Off
Section 8 makes it an offence for a person who knows or ought reasonably to have known that a report under section 44 is being prepared, has been sent or is about to be sent to the Centre to disclose information relating to that report to another person. It is a defence to prove that the person did not know or have reasonable grounds to suspect the disclosure was likely to prejudice the report. Section 8(4) provides that a lawyer, notary or other independent legal professional seeking to dissuade a client from engaging in illegal activity does not commit the offence. Design your internal escalation so that knowledge of a pending report is confined to those who need it, because the offence attaches personally to whoever makes the disclosure.
Internal Compliance Programme
Section 47 requires a reporting institution to establish internal controls and internal reporting procedures: identifying the person to whom an employee reports a suspicion, giving that person reasonable access to relevant information, and requiring them to report under section 44(2) where there is a sufficient basis. In practice a programme also includes written policies, a designated compliance officer often called a Money Laundering Reporting Officer (MLRO), staff training and independent testing. For a law practice, the MLRO should have the standing to escalate a matter against a more senior colleague or partner, and the programme should be tested rather than existing only on paper.
Anti-Money Laundering in Kenya: Penalties and Enforcement
Section 16 sets the penalties. Contraventions of sections 3, 4 or 7 carry up to fourteen years’ imprisonment or a fine of up to KES 5 million or the value of the property involved, whichever is higher, for a natural person, and up to KES 25 million or the value of the property, whichever is higher, for a body corporate. Contraventions of sections 5, 8, 11(1) or 13, which include tipping off, carry up to seven years’ imprisonment or a fine of up to KES 2.5 million, or both, for a natural person. Section 24B also empowers the Centre to impose civil penalties for non-compliance. Treat AML compliance as a standing governance item, reviewed as the business and its client base change.
How We Can Help
Clay & Associates Advocates advises on POCAMLA compliance programmes, DNFBP obligations for law firms and other professional service providers, MLRO appointment and training, and suspicious transaction reporting procedures. Our guide to Financial Reporting Centre reporting in Kenya covers the reporting process in more detail. Speak to our regulatory and compliance practice or contact us to confirm whether your business is a reporting institution and to review your programme before an inspection does.
Sources: Proceeds of Crime and Anti-Money Laundering Act, 2009, sections 2, 8, 16, 24B, 44 to 47A.
Frequently asked questions
Is a law firm a reporting institution under POCAMLA?
Yes. Advocates, notaries and other independent legal professionals who are sole practitioners, partners or employees within professional firms are listed as DNFBPs in section 2.
How quickly must a suspicious transaction be reported?
Within two days after the suspicion arose (section 44(2)), regardless of the amount.
How long must AML records be kept?
At least seven years, or longer if the Centre requires in writing (section 46(4)).
What is tipping off?
Disclosing information about a suspicious transaction report that is being prepared or has been sent, an offence under section 8 subject to the defence and the lawyer exception in that section.
Need advice on your own matter?
Tell us what you are dealing with. You will know what it involves and what it costs before you commit.
This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.
