Executives and boards of directors of financial institutions, including commercial banks, face ousters from office as the government tightens rules to curb terror financing.
The Interior Ministry has proposed amendments to the Prevention of Terrorism (Implementation of the United Nations Security Council Resolutions on Suppression of Terrorism) Regulations, 2023, empowering the Financial Reporting Centre (FRC) to suspend managers, board of directors, and supervisory and executive management members found in breach of anti-terror financing regulations.
Currently, the 2023 regulations require that a person who is found guilty of contravening the provisions of the rules for which no penalty is given, that person is liable to a fine not exceeding Sh3 million or to imprisonment for a term not exceeding seven years.
Although the 2024 regulations tabled in Parliament last week have retained the Sh3 million penalty or seven-year jail term, the new set of rules has expanded the penalties to include the removal of managers, board of directors, and supervisory and executive management members as well as revocation of institutions trading licenses.
“The Financial Reporting Centre, a supervisory body or self-regulatory body, as the case may be, ban the violator from working in the sector related to the violation for the period determined by the supervisory authority” new changes to section 25 of the legal notice No 188 on the Prevention of Terrorism Act, states.
If the National Assembly approves the legal notices, the FRC will be empowered to constrain the powers of the board of directors, supervisory or executive management members, managers, or owners who are proven to be in violation including the appointment of temporary inspector, suspend managers, board of directors, and supervisory and executive management members who are proven to be responsible of the violation for a period to be determined by the supervisory authority or request their removal.
The FRC will also have the power to suspend or restrict the activity or the profession for a period to be determined by the supervisory authority or cancel the license.
The Legal Notice No 187 and 188 were published on November 20, 2024, by former Interior and National Coordination Cabinet Secretary Kithure Kindiki.
The new legal notices seek to further enhance the implementation of the United Nations Security Council Resolutions on Prevention, Suppression, and Disruption of Proliferation Financing) Regulations, 2023.
The regulations provide for powers to freeze and unfreeze funds of suspects linked to terrorism.
The regulations establish the Counter Financing of Terrorism Inter-Ministerial Committee chaired Interior Cabinet Secretary to determine whether to allow suspects access to the funds suspected to be proceeds of terrorism.
Other members of the committee include the cabinet secretaries for Treasury and Foreign Affairs, the Governor of the Central Bank of Kenya, the Attorney General, the Police Inspector General, the Director General of the National Intelligence Service, and the Director General of the Financial Reporting Centre.
Before the gazettement of the regulations, only courts had powers to freeze and unfreeze accounts of suspects (terrorism financiers and beneficiaries) to allow them to meet basic needs such as rent, medical, and food.
The team will review the suspect’s request within 30 working days and then forward the application to the relevant sanctions committee of the United Nations for concurrence.
It will then within 48 hours of submitting this request authorise the release of funds from the frozen accounts to the suspect within 48 hours.