Money scammers face tough penalties (2024)

By Jackson Okoth

It is now a tough call introducing illicit cash into the financial system without attracting the attention of regulators.

This follows commencement of the Proceeds of Crime and Anti-Money Laundering Act of 2009, which prevents criminals from hiding their ill-gotten cash in the stock market, insurance, property, a bank account, gambling casino or those buying individual personal pension plans.

" We are still working on relevant rules and regulations to operationalise this act," said Deputy Premier and Finance Minister Uhuru Kenyatta.

The legislation comes into place amid growing concerns and mounting speculation that there is an influx of unexplained cash into the country. Fingers have been pointing to the troubled Somalia with suggestions that part of the ‘piracy cash booty’ could be fuelling the price hikes in property market.

.

Keep Reading business

• End of an era: Hilton finally up for sale, taking with it nostalgic city memories Premium
• Kenya to miss growth target on budget gaps and revenue leaksCivil servants face the axe as Ruto seeks to ease ballooning wage bill PremiumMinistry launches portal to ease tradeTime, business: How valuable was last meeting you attended?

Analysts cite absence of a legal framework to combat money laundering, which has made it fairly easy for pirates to sanitise their money in the country.

Already, placed under the watchful eyes of Central Bank of Kenya (CBK) and Kenya Revenue Authority (KRA) are forex bureaus suspected to be a route for proceeds of crime into the country.

"The Government is aware that some forex bureaus are aiding tax evasion through engagement in business activities that they are not licensed to undertake," Uhuru said while presenting the 2010/11 budget before Parliament.

Under watch

"To address this, I have directed the CBK and KRA to jointly undertake a comprehensive audit of the operations of forex bureaus and submit their final report to my office by end of September."

This new anti-money laundering legislation was passed in December 2008 after two previous attempts by Parliament failed.

Although the bill was signed into law by President Kibaki last year, efforts to operationalise the Act has been slow, suggesting a possible lack of political will.

The Proceeds of Crime and Anti-Money Laundering Act establishes a financial reporting centre to assist in the identification of the proceeds of crime and an asset recovery agency for tracing and recovering assets obtained by illegal means.

"The banking industry had already put in place guidelines, ahead of this new law. What has changed is that the new rules have the force of law," said John Wanyela, Executive Director, and Kenya Bankers Association (KBA).

The CBK and KBA guidelines and the amended Banking Act have provisions for customer identification, record keeping, especially for foreign currency transactions, suspicious transactions reporting, and disclosure of information by the CBK to domestic or foreign financial regulatory authorities.

Suspicious accounts

"Previous cases of customers whose ‘suspicious’ accounts have been flagged seeking for court intervention will now be a thing of the past," said Wanyela.

This Anti-Money Laundering (AML) law, which took effect on June 28 this year, provides for the ‘freezing, seizure and confiscation of proceeds of crime.

While commercial banks have been in the past required to report ‘suspicious funds’ moving through their customers’ accounts, the new law now makes it mandatory.

AML law requires forex bureaus and other money transfer and financial institutions to be vigilant, identify customers and report any transaction of more than $10,000 (Sh810,000) in hard currency.

Stockbrokerage houses and insurance industry players are seen as players to be most affected by the AML law because of their weak internal structures and past history of fraudulent dealers. But investment bankers have downplayed effects of the new law on their operations.

"The first line of defense for us is commercial banks who process cheque payments for the big clients. But for retail investors, we are tracking down guidelines issued by CMA," said Job Kihumba, Executive Director, Standard Investment Bank (SIB).

A circular has already been issue by Kenya Association of Stockbrokers and Investment Banks (KASIB) urging its membership to comply with the new law.

A list of measures that investment banks and stockbrokers will be required to comply under the AML Act include obtaining and maintaining proper identification of clients wishing to open accounts or carry out transactions whether directly or through nominees.

Personal details

Clients who fail to provide evidence of their identity will not be allowed to engage in business transactions.

Listed as supervisory bodies under AML law are Central Bank of Kenya (CBK), Insurance Regulatory Authority (IRA), Betting & Licensing Control Board, Capital Markets Authority (CMA), Institute of Certified Public Accountants of Kenya (ICPAK), Law Society of Kenya (LSK) and Board of Registration of Architects and Quantity Surveyors.

Some of the punitive measures under the new law include institutions and professionals like accountants and advocates who breach the law.

For instance, handling or transporting money or other valuables that will help another person to commit a crime attracts a 14-year jail term and, or, a fine not exceeding Sh5 million or the value of the property involved, whichever is higher.

Supervisory bodies, including the CMA, IRA, the CBK, and Retirements Benefits Authority will also report to the Centre any suspicious transactions, failure to which a member of their staff will be liable to a term of three years in prison and/or a fine not exceeding Sh1 million.

The institutions, on the other hand, may be fined Sh5 million for the offence.

Organisations risk fines for their employees’ indiscretion.

In case an employee leaks information about a report that is being prepared to be taken to the Centre, the institution will be fined up to Sh10 million or an amount equivalent to the value of the property.

The individual who leaks the information will be fined Sh2.5 million and/or spend seven years in prison.

.

Popular this week

Diesel, kerosene prices drop by biggest margin in latest reviewTough questions as Linturi claims fertiliser is goodFree delivery: Watchdog calls out e-commerce firms over rising scamsPremiumHow Kenyans coped with high living costs, rising energy pricesPremiumTransport CS Murkomen unveils plan to boost domestic flightsPremium