Economy

State to freeze suspect deals without court nod

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Central Bank of Kenya. FILE PHOTO | NMG

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Summary

  • The State will have powers to seize property and freeze transactions deemed suspicious if Parliament adopts proposed changes to the law.
  • Amendments to the Proceeds of Crime and Anti-Money Laundering Act will give the Financial Reporting Centre (FRC) powers to stop the transactions for not more than five working days.

The State will have powers to seize property and freeze transactions deemed suspicious if Parliament adopts proposed changes to the law aimed at stepping up the war on money laundering.

Amendments to the Proceeds of Crime and Anti-Money Laundering Act will give the Financial Reporting Centre (FRC) powers to stop the transactions for not more than five working days and allow other State agencies to investigate them.

The State-backed Proceeds of Crime and Anti-Money Laundering (Amendment) Bill, 2021 seeks to enable the FRC and other security agencies to stop criminal activities before they occur.

Currently, individuals and firms can complete transactions suspected of money laundering but keep records that are used for investigations, a gap that criminals have used to circulate dirty cash and fund activities linked to terrorism.

“The Centre [FRC] may, for purposes of achieving the objectives of the Act, direct the reporting institution or person, in writing not to proceed with the transaction or proposed transaction or any other transaction in respect of the funds or property affected by that transaction or proposed transaction,” says the Bill.

The five-day freeze order will allow the FRC to share information with other agencies such as the Kenya Revenue Authority (KRA), the Ethics and Anti-Corruption Commission (EACC), and the Assets Recovery Agency (ARA) for appropriate action.

Transactions targeted include those relating to terrorism financing, buying and selling of property, creation, operation, and management of companies as well as management of bank savings and shares accounts on behalf of clients.

“The Bill seeks to introduce a new section 44A requiring the Financial Reporting Centre to intervene where the Centre has reasonable grounds to suspect that a transaction may be suspicious. This will ensure timely access to information on assets held by criminals as preventive and repressive measure and, ultimately disrupting criminal networks and unlawful activities.”

Lawmakers will debate the Bill when they return from their month-long recess next week.

The EACC and the ARA are currently required to get court orders for seizure and forfeiture of the assets suspected of involvement in money laundering.

The requirement to get court orders has seen investigative agencies lag as suspects complete transactions and enjoy proceeds of dirty cash.

The proposed changes come two months after The International Monetary Fund (IMF) asked Kenya to tighten anti-money laundering laws and intensify inspection of bank transactions.

The FRC in March forwarded to the Treasury the draft changes to the money laundering law in a fresh bid to compel lawyers to start disclosing suspicious financial deals involving their clients.

The proposed amendments are aimed at designating advocates, notaries, and other independent legal professionals as reporting entities for dirty cash dealings.

The US government in 2019 put Kenya on a list of global hotspots for money laundering, citing insufficient controls on the circulation of dirty cash and the lack of laws against terrorism financing.

The Central Bank of Kenya (CBK) has recently tightened the noose on money laundering with eyes on drug dealers, fraudsters, tax evaders, corrupt politicians and terrorist groups.

In 2019, the CBK issued a circular to lenders directing them to increase scrutiny of accounts of politicians and senior government officials, NGOs, and cash-intensive businesses such as supermarkets, liquor stores, and car dealerships.

The circular also sought to tighten oversight of businesses operated by professional service providers, foreigners, casinos, real estate dealers, and dealers in precious metals.

In 2018, the regulator fined five banks — KCB, Equity, StanChart, Co-operative, and DTB — Sh392.5 million for facilitating the National Youth Service scandal.

Kenya recently formed a high-powered anti-money laundering task force to establish the extent of money laundering in the most susceptible sectors of the economy.

The team brings together 30 State agencies from the security apparatus, the Judiciary, as well as banks, saccos, real estate, and gaming regulators.