Dirty cash: Court stops lawyers from disclosing deals

New Content Item (1)

The High Court in Nairobi. FILE PHOTO | NMG

What you need to know:

  • Justice James Makau temporarily suspended section 2 (c)(i) and section 14 (b) of the Proceeds of Crime and Anti-Money Laundering (Amendment) Act, pending the determination of a case by lawyer Mwaura Kabata.
  • The Judge directed FRC and the Attorney General to file their responses within 14 days and the matter to be mentioned on January 22.

The High Court has temporarily stopped the implementation of a new law that compels lawyers and their staff to disclose suspicious financial deals involving their clients.

Justice James Makau issued the order following a request by Nairobi-based lawyer Omwanza Ombati, who argued that the amendments introduced in the Proceeds of Crime and Anti-Money Laundering (Amendment) Act by the National Assembly are harmful to practising advocates.

“Implementation of section 2(c) and section 14 (b) of the amended Act makes the advocates and their employees, who are not advocates, including accountants, clerks and cleaners, as reporting agents of the Financial Reporting Centre (FRC). Offices of advocates have been made junked police station,” said Mr Ombati.

He added that the new provisions of the State-backed law violates the principle of confidentiality between an advocate and client.

This is because the advocates, notaries and other independent legal professionals have been designated by the disputed law as reporting entities for dirty cash dealings.

“The amendment introduced in the Act has made lawyers unwilling State agents and turned law offices into archives for use by the police and Prosecution. Advocates and their employees face penal consequences for not complying with the new law,” said Mr Ombati. He stated that the provisions manifestly erode advocate-client privilege.

In granting the temporary order, Justice Makau said Mr Ombati had demonstrated that advocates stand to suffer prejudice if the amendments, which came into force on January 3, 2022, are enforced.

“Pending the hearing, a conservatory order is hereby issued stopping any further implementation of section 2(c) and section 14 (b) of the Proceeds of Crime and Anti-money Laundering Amendment Act (2021) as regards to the advocates and their staff,” the judge ordered.

He said the petitioner had proved that he has a strong case since lawyers and their staff, who are said to be targeted by the amendments, stand to suffer and be prejudiced.

In the case, Mr Ombati argues that there are difficulties arising from the law because there is a conflict between the new provisions of the law and other Acts.

For instance, lawyers face the risk of being found to have either breached the new provisions of the Act should they assert their client’s privilege and resist to comply, or the provisions of the Advocate Act, Evidence Act and the professional code of conduct in the event they decide to comply.

“We submit that there is a fundamental principle of law in a democratic society that for the legal system to work advocates and the bar at large must be allowed the independence to work. In the present case, advocates face penal consequences for not complying with the new provisions of the law,” said Mr Ombati.

When the amendments were being deliberated at the National Assembly, Members of Parliament drawn from the legal profession had raised opposition.

Led by Tharaka MP George Murugara, the MPs had sought the direction of the Speaker on the constitutionality of two sections of the law which they argued infringe on the rights of privacy.

Mr Murugara stated that the import of the two sections means that lawyers will be among persons answerable to the Asset Recovery Agency (ARA).

According to the Act, the advocates, notaries and other independent legal professionals who are sole practitioners, partners or employees within professional firms have an obligation to report suspicious and dirty financial transactions to the Financial Reporting Centre (FRC).

The lawyers are now agents of FRC and they are also required to keep records of cash transactions totaling at least Sh1 million and above.

The State, through the FRC, sponsored amendments to the Proceeds of Crime and Anti-Money Laundering Act in a bid to seal deficiencies in curbing illicit cash transactions.

The case will be mentioned on February 22, 2022.

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.