CMA seeks power to monitor brokers with lavish lifestyles

• The draft guidelines signed by Capital Markets Authority (CMA) chairman Kung’u Gatabaki and acting chief executive Paul Muthaura are expected to be gazetted into law after a month of public debate.
• The proposed rules will guide stockbrokers, financial advisers, investment banks and other CMA licensees on how to detect, prevent and control money laundering activities.
• Market operators will be required to report suspected money laundering activities, including employees who appear to be living beyond their means.
• Transactions coming from countries known for drug and human trafficking, gun running and related crimes are also among suspicious activities.
• Numbered accounts are also to be verified and disclosure of the beneficial owners or controlling persons behind nominee accounts will be required to be made.
• Licensees are also required not to open or maintain anonymous or fictitious accounts. Compliance officers of the market intermediaries will be expected to report any suspicious deals.

The capital markets regulator has drafted new anti-money laundering guidelines that if passed into law will require stockbrokers, investment banks and other licensees to report suspicious transactions and monitor employees’ lifestyles.

The draft guidelines signed by Capital Markets Authority (CMA) chairman Kung’u Gatabaki and acting chief executive Paul Muthaura are expected to be gazetted into law after a month of public debate.

The proposed rules will guide stockbrokers, financial advisers, investment banks and other CMA licensees on how to detect, prevent and control money laundering activities.

Market operators will be required to report suspected money laundering activities, including employees who appear to be living beyond their means.

“Suspicious activities or transactions may indicate possible money laundering activities (like) where there is a change in characteristics of the employee for example lavish lifestyles, unexpected increase in performance. In such instances, the licensed or approved entity may want to monitor such situations,” say the draft rules.

Transactions coming from countries known for drug and human trafficking, gun running and related crimes are also among suspicious activities.

Numbered accounts are also to be verified and disclosure of the beneficial owners or controlling persons behind nominee accounts will be required to be made.

Licensees are also required not to open or maintain anonymous or fictitious accounts. Compliance officers of the market intermediaries will be expected to report any suspicious deals.

READ: Listed firms face tougher scrutiny under proposed law

“The compliance officer of a licensed or an approved entity shall play an active role in the identification and reporting of suspicious transactions, including the regular review of exception reports of large or irregular transactions generated by the reporting internal system of the entity as well as ad hoc reports made by staff who have a direct contact with the clients,” says the proposed laws.

The compliance officer is supposed to report the suspicious transactions to the Financial Reporting Centre.

The centre will be established if a Bill published by the Finance minister Njeru Githae goes through.

The Anti-Money Laundering Advisory Board approved the immediate setting up of the Financial Report Centre in April.

The proposed laws say that the regulator can use sections of the CMA Act as a remedy for making licensees comply. The sections in the Act touch on renewal, revocation of licences, offences and penalties for breaching the CMA Act.

However, industry players said that the anti-money laundering proposals may not be enforceable as the regulator is proposing.