The move by the State to allow banks access to government data on secret owners of companies and their beneficiaries is another milestone in the fight against money laundering.
Under the Proceeds of Crime and Anti-Money Laundering (Amendment) Act, 2022, banks are supposed to establish the ultimate beneficial owners of companies or those with substantial control of the business.
But their efforts to flag suspicious transactions have been frustrated by the fact that the electronic register on beneficial ownership information is only available to the law enforcement agencies such as the Kenya Revenue Authority (KRA), the Ethics and Anti-Corruption Commission (EACC), the Assets Recovery Agency (ARA), security agencies and the Financial Reporting Centre (FRC).
Granting banks access to the electronic registry will, among others, help in tracking the money deposited by ‘smurfs’ — money launderers who evade scrutiny from the authorities by breaking up large transactions into a set of smaller transactions that are each below the reporting threshold.
Changes to the law will enhance the Know Your Customer (KYC) rules and help preserve the integrity of Kenya’s financial system as well as locking out financiers of terrorism activities.
But they also have the potential to spook customers if sensitive information falls into the wrong hands.
Banks must therefore strike a balance between flagging suspicious transactions passing through their systems and ensuring that they respect the privacy of their clients.
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