Kenya Bolsters AML and CFT Regulation Framework with Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act

The Anti-Money Laundering and Combating of Terrorism Financing (AML and CFT) Laws (Amendment) ACT, 2023 (the Amendment Act) was assented into law on the 1st of September 2023 and came into force on 15th September 2023.

The Act is testament to Kenya’s continued commitment to combating illicit financial flows, enhancing customer due diligence in financial markets, improving record keeping and reporting of suspicious transactions.

The Amendment Act introduces amendments to the following statutes:

a) Proceeds of Crimes and Anti-Money laundering Act, No. 9 of 2009, Laws of Kenya (POCAMLA);
b) The Companies Act, No. 17 of 2015 Laws of Kenya (the Companies Act);
c) Limited Liability Partnership Act, No. 42 of 2011 Laws of Kenya;
d) Insurance Act, Cap 487 Laws of Kenya (Insurance Act);
e) Capital Markets Act, Cap 485A Laws of Kenya (Capital Markets Act);
f) Banking Act, Cap 488 Laws of Kenya (Banking Act);
g) Central Bank of Kenya Act, Cap 491 Laws of Kenya (CBK Act); and
h) Anti-corruption and Economic Crimes Act, No. 3 of 2003 Laws of Kenya.

1. Proceeds of Crimes and Anti-Money laundering Act

The POCAMLA is the primary statute that defines, criminalizes and penalizes money laundering in Kenya. 

1.1. Financial Group Culpable - A financial group may be considered as a legal person that can be held culpable for offences related to money-laundering. Sanctions against a group entity may extend to the wider group. 

1.2. Suspicious Transactions in the Legal Profession - Legal professionals compelled to report any suspicious transactions.

1.3. Reporting Threshold Increased - Has been increased from USD 10,000 to USD 15,000.

1.4. Increased Penalties - Imposes a penalty of up to fifty percent (50%) of the monetary instrument involved in the offence from the previous penalty of ten percent (10%).

2. Companies Act

The Amendment Act has introduced additional compliance requirements for companies registered in Kenya.

These are:

2.1. Record Keeping - Companies required to keep all information relating to the directors, shareholders and/or beneficial owners for a minimum period of ten (10) years from the date a person ceases to be a director, shareholder and/or beneficial owner.

2.2. Nominee Directors - The concept of a nominee director is now recognized. The Amendment Act defines a nominee director as a natural person or a corporate person who exercises the functions of a director in the company subject to the directions/instructions of another person.

Every company that has nominee directors is required to maintain a register of nominee directors. The record must disclose among other things the particulars of the person who has nominated the nominee director. The register of nominee directors shall not be accessible to members of the public.

2.3. Company Secretary or Contact Person for Private Companies - The Companies Act previously required only companies with a paid-up capital of more than Kes. 5,000,000 to have a company secretary. The Amendment Act imposes a requirement on private companies that do not have a director resident in Kenya to appoint either a company secretary or a contact person (natural person) with permanent residence in Kenya.  The contact person will be required to keep a record of the directors, shareholders, beneficial owner and any other information relating to the company under the Companies Act. Additionally, the contact person will be responsible for providing information relating to the company to government authorities if requested. The Companies’ Registry is yet to update the Business Registration Service (BRS) to provide for the appointment of a contact person.

2.4. Record Keeping after Striking Off - Upon the striking off of a company from the register of companies, certain records of the company must be kept for at least seven years from the date the company is struck off. 

3. Limited Liability Partnership Act 

The Amendment Act introduces compliance requirements for Limited Liability Partnerships (LLPs) registered in Kenya including:

3.1. Register of Nominee Partners - Similar to the amendment to the Companies Act, the Amendment Act introduces the concept of Nominee Partners in LLPs. As with nominee directors, the Amendment Act requires LLPs to include in the register of nominee partners, the particulars of the nominee partner and the person under whose instructions the nominee partner will be acting under.

3.2. Records of the LLP - Similar to the amendment to the Companies Act, the Amendment Act requires records pertaining to beneficial owners of an LLP to be kept for a minimum period of ten (10) years after such person ceases to be a beneficial owner.

4. Insurance Act, Capital Markets Act, Banking Act, CBK Act

The Amendment Act grants supervisory powers to regulators of financial services players including the Insurance Regulatory Authority (IRA), Capital Markets Authority (CMA) and Central Bank of Kenya (CBK). The amendments are consistent with previous oversight powers, the aim being to align provisions of the POCAMLA with the three legislative frameworks.

5. State Corporations Act

The Financial Reporting Centre (FRC) has been excluded from the purview of the State Corporations Act. The FRC plays a critical role in the AML and CFT framework by receiving, analysing, and disseminating financial intelligence to law enforcement agencies and other competent authorities. The exclusion entrenches the independence of the FRC and prevents state interference.

6. Anti-corruption and Economic Crimes Act

The Amendment Act expands the definition of economic crimes to include laundering the proceeds of corruption. Previously, economic crimes were limited to fraudulent dealings in public property. This expansion extends the mandate of the Ethics and Anti-Corruption Commission (EACC) to matters relating to money laundering. The EACC can now investigate proceeds of corruption that have been laundered as part of its mandate.

Conclusion

As Kenya forges on in its commitment to AML and CFT by adopting internationally acceptable standards, she continues to adopt a proactive approach to tackling financial crimes through a wide array of sectoral laws. The amendments collectively aim to enhance transparency, accountability, and effectiveness in the fight against money laundering and terrorism financing.