Lawyers to Report Suspicious Transactions in Anti-Money Laundering Fight - 2024-02-21

Lawyers will from next month start reporting suspicious transactions by their clients to the Financial Reporting Centre (FRC), in a major boost to the fight against money laundering in Kenya.

The Financial Action Task Force (FATF), a global body for combating anti-money laundering and terrorism financing, is working to halt illegal transnational money laundering crimes.

“We are implementing a strong legal regime to fix the gaps in the anti-money laundering law. We are tightening the law on money laundering and proliferation of tourism financing,” Saitoti Ole Maika, the FRC director-general said.

The law society currently lacks the powers to undertake supervision of its members as far as combating money laundering and terrorism financing is concerned.

Lawyers will from next month start reporting suspicious transactions by their clients to the Financial Reporting Centre (FRC), in a major boost to the fight against money laundering in Kenya.

The Anti-Money Laundering and Combating of Terrorism Financing (Amendment) Bill, 2023 will take effect from March 15, 2024, bringing law firms into the ambit of reporting entities.

The law currently requires financial institutions to keep records of cash transactions of more than Sh1.5 million and report suspicious deals to the Financial Reporting Centre (FRC) – the agency tasked with identifying and combating money laundering and financing of terrorism.

The Financial Action Task Force (FATF), a global body for combating anti-money laundering and terrorism financing, is working to halt illegal transnational money laundering crimes.

“We are implementing a strong legal regime to fix the gaps in the anti-money laundering law. We are tightening the law on money laundering and proliferation of tourism financing,” Saitoti Ole Maika, the FRC director-general said.

“Under the FATF regime, lawyers are now required to file financial transactions with the FRC from March 15, 2024.”

The move ended a stalemate that had tested one of the conditions Kenya was required to fulfil to continue accessing loans from the International Monetary Fund (IMF).

The FRC and the Law Society of Kenya (LSK) had last year reached an agreement to withdraw a case which blocked the implementation of a new law that compels lawyers and their staff to disclose suspicious financial deals involving their clients.

“Each country must have a financial intelligence unit which the FRC is for Kenya. As we tighten the noose on banks, we also need to bring under the control of the FRC the trusts and companies.

“There is no single ‘wash wash” activity that is happening without a lawyer being involved. Big lawyers in town are engaged in an estimated Sh3.3 billion gold export enterprise,” Mr Maika told a sensitisation workshop for journalists in Naivasha over the weekend.

“We know that lawyers sign agreements to deal with exports of gold. The issue in question is the legal arrangement. Before we brought lawyers into the reporting framework, they used to hide under the cover of advocate-client confidentiality.”

The National Assembly in 2019 approved amendments to the Proceeds of Crime and Anti-Money Laundering (Amendment) Act to compel lawyers to start disclosing suspicious financial deals involving their clients.

At the time, the lawyers, through Nairobi-based lawyer Omwanza Ombati, moved to court, arguing the changes to the Act were harmful to legal practice.

Section 2(c) and section 14 (b) of the Proceeds of Crime and Anti-Money Laundering Act make the advocates and their employees, including accountants, clerks and cleaners, reporting agents of the FRC.

The Proceeds of Crime and Anti-Money Laundering (Amendment) Bill, 2023 seeks to amend section 36 of the principal Act to ensure that the LSK regulate, supervise and enforce compliance for anti-money laundering (AML), combating the financing of terrorism (CFT), and countering proliferation financing (CPF) for lawyers, notaries and other legal professionals.

The law society currently lacks the powers to undertake supervision of its members as far as combating money laundering and terrorism financing is concerned.

The amendments give the LSK powers to conduct an onsite inspection, compel the production of any document or information it may require for the purpose of discharging its supervisory mandate and impose monetary, civil or administrative sanctions for violations related to AML/CFT/CPF purposes.