Fraud recovery and asset tracing in Kenya: recent legal developments and key case law

This article highlights key legislative provisions and judicial decisions that underscore Kenya’s approach to fraud and asset recovery, offering a clear perspective on how courts and enforcement agencies combat economic crimes and recover assets obtained illicitly.

In recent years, Kenya’s judicial and regulatory framework for fraud recovery and asset tracing has undergone significant development, driven by the growing sophistication of fraud schemes and economic crimes affecting both public and private sectors. Legal mechanisms under statutes like the Proceeds of Crime and Anti-Money Laundering Act, Chapter 59A of the Laws of Kenya (POCAMLA), bolstered by landmark case law, continue to shape and refine the enforcement of fraud recovery and asset tracing.

The pivotal role of POCAMLA in asset recovery

POCAMLA is a cornerstone in Kenya’s legal arsenal against financial crimes, particularly in establishing the Assets Recovery Agency (the ARA), a state agency with the power to identify and trace proceeds of crime and institute court proceedings in freezing, seizure, forfeiture and confiscation of proceeds of crime. POCAMLA enables Kenya to hold individuals accountable for unexplained wealth, especially where such wealth is suspected to be proceeds from corruption, money laundering, or other illegal activities.

One landmark case illustrating POCAMLA’s power is Assets Recovery Agency v Pamela Aboo; Ethics & Anti-Corruption Commission (Interested Party) [2018] KEHC 1845 (KLR). The ARA successfully sought an order for the declaration that the assets totalling KES 19,688,152.35 (approx. USD 151,000) held under various bank account numbers by Pamela Aboo, a former procurement officer, whose wealth vastly exceeded her known lawful income, were proceeds of crime and sought a further order for the forfeiture of those assets to the Government.

The court ruled that, under POCAMLA, an individual is required to provide a satisfactory explanation for the acquisition of wealth once reasonable suspicion of criminality arises. Hon. Lady Justice Hedwig I. Ong’udi observed that once the ARA had demonstrated a legitimate basis for suspicion, the burden shifts to the individual to prove the lawful origin of the assets. Ms. Aboo was unable to explain the source of the funds or to sufficiently allay the allegations by the ARA that her accounts had been used as a conduit for moneys that had not been lawfully acquired, or for proceeds of crime. Specifically, the Court held that, “where a party fails to produce certain evidence, a presumption arises that the evidence produced would be unfavourable to that party”.

This case illustrates that courts are keen to support the ARA’s mandate to trace, freeze, and recover illicit assets effectively, even without a prior criminal conviction, so long as a clear connection to unlawful activities can be reasonably established.

Another landmark case under POCAMLA was Assets Recovery Agency v Samuel Wachenje alias Sam Mwandime, Susan Mkiwa Mndanyi, Vandame John, Anthony Kihara Gethi, Charity Wangui Gethi, Ndungu John, Gachoka Paul & James Kisingo [2020] KEHC 2556 (KLR), which involved the seizure of assets illegally obtained from the State Department of Planning in the Ministry of Devolution. The ARA filed the case against various individuals and sought forfeiture of various properties following the conclusion of investigations by the Directorate of Criminal Investigations (DCI) into allegations of theft and fraud of funds amounting to KES 791,385,000 (approx. USD 6,087,576.92) from the State Department of Planning in the Ministry of Devolution. The investigations had revealed massive fraud and embezzlement of public funds perpetrated by public officials and private persons.

The court’s decision in this case affirmed that preservation orders could be sought pre-emptively to prevent dissipation of assets suspected to be proceeds of crime. The court’s willingness to enforce such measures without requiring a criminal conviction speaks to the judiciary’s strong stance against corruption, ensuring that assets linked to large-scale public fraud are preserved for recovery.

The Judiciary’s embrace of the tracing doctrine in fraud recovery

Tracing is a common law remedy that allows for the recovery of assets or funds that have been misappropriated, even when transferred to third parties. Kenyan courts have increasingly recognized and applied tracing principles to ensure that victims of fraud can recover their assets effectively.

In Kenya Anti-Corruption Commission v Stanley Mombo Amuti [2011] KECA 248 (KLR), the Court of Appeal upheld a tracing order to recover assets from a former public official who was unable to explain large sums deposited into his account. A search, authorized by the court, on his residence and office, revealed cash amounts and cheques in excess of KES 21,000,000 which were seized. 

Further searches on his bank accounts established that the respondent had deposited substantial amounts in excess of KES 140,000,000 and withdrawn in excess of KES 85,000,000 over a period of ten months, between September 2007 and June 2008. Several immovable properties were also traced to the respondent at different stages of conveyancing and development, the estimated value of which was in excess of KES 56,000,000. He also had four motor vehicles in his possession.

This case underscored that wealth obtained unlawfully could be traced and ordered forfeited to the state. Stanley Mombo Amuti’s inability to provide a credible explanation for the source of his assets led the court to conclude that the funds were proceeds of corruption, resulting in their forfeiture.

The case highlights the judiciary’s proactive approach to combating fraud by allowing public institutions to reclaim misappropriated assets through tracing.

Consequently, the Supreme Court of Kenya in Stanley Mombo Amuti v Kenya Anti-Corruption Commission [2020] KESC 45 (KLR) dismissed any attempts of the former public official to reclaim the illegally obtained assets.

One of the main challenges in fraud recovery is balancing the right to private property, enshrined in the Constitution, against the public interest in recovering assets linked to economic crimes. Kenyan courts have increasingly taken the position that property rights do not extend to assets obtained unlawfully.

Cross-border cooperation and asset tracing

In light of the international scope of modern financial fraud, Kenya has embraced cross-border collaboration for tracing and recovering assets in foreign jurisdictions. The country’s ratification of the United Nations Convention against Corruption 2003 facilitates mutual legal assistance, enabling authorities to pursue assets outside Kenya’s borders.

A notable example of cross-border cooperation can be seen in Ethics and Anti-Corruption Commission v Wambua [2024] KEHC 6772 (KLR), where the court recognized corruption, economic crime and money-laundering are serious organized and transboundary crimes, which have caused the world and nations severe issues, huge economic leakages and social squeeze, prompting international, national and regional concerted focus and efforts through tools such as United Nations Convention against Corruption, the United Nations Convention against Transnational Organized Crime, the African Union Convention on Preventing and Combating Corruption, to mention but a few.

This case highlighted Kenya’s commitment to retrieving assets, even when held abroad, by leveraging international partnerships and legal frameworks. Such cooperation is crucial in cases involving high-profile corporate frauds where assets are swiftly moved across borders.

Comment

Kenya’s legal framework for fraud recovery and asset tracing has evolved to address the complexities of modern fraud schemes. Through POCAMLA’s robust provisions, court-enforced tracing doctrines, and cross-border partnerships, the judiciary is positioned to facilitate more effective asset recovery, demonstrating the judiciary’s commitment to combating corruption and ensuring accountability.