Kenya: President Signs the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act 2023

Kenya: President Signs the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act 2023

In a significant move to enhance financial security and combat illicit activities, the President of Kenya officially signed into law the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act 2023 on September 1, 2023. This Amendment Act underscores Kenya’s commitment to strengthening its financial regulatory framework, fostering international cooperation, and aligning with global standards in the fight against money laundering, terrorism financing, and related illicit financial activities.

Prior to the enactment of the Amendment Act, the Law Society of Kenya (LSK) sought a court repeal of amendments compelling lawyers to disclose suspicious financial deals involving their clients. Consequently, the LSK agreed with the State to be designated as a self-regulating body in line with the Financial Action Task Force (FATF) standards, protecting client-attorney privileges.

Key Highlights of the Amendment Act

Beneficial Ownership

Limited Liability Partnership Act, 2011 (No. 42 of 2011):

• Definition: The Amendment Act defines a Beneficial Owner as “the natural person who ultimately owns or controls a legal person or arrangement or the natural person on whose behalf a transaction is conducted, including those who exercise ultimate effective control over a legal person or arrangement.”
• Register Requirements: Section 31B requires every limited liability partnership (LLP) to maintain a register of its beneficial owners and lodge a copy with the Registrar, both for proposed LLPs and existing LLPs within 60 days of the section coming into force.
• Update and Record Maintenance: LLPs must update the Registrar with any amendments to the register within 14 days and keep records for at least 10 years.
• Penalties: Penalties range from KES 100 for each day of default to a maximum of KES 500,000. The Registrar may also issue directives for compliance.

Foreign Limited Liability Partnership:

Section 34B(1)(b)(iv) mandates that applicants for foreign LLP registration submit a notarized copy of a list of beneficial owners and their particulars, along with other requirements.

Companies Act, 2015 (No. 17 of 2015):

• Register Requirements: Section 16A requires applicants for company registration to ensure compliance with beneficial ownership particulars. Section 93A mandates every company to maintain a register of its beneficial owners and lodge a copy with the Registrar, both for proposed and existing companies within specified time frames.
• Update and Record Maintenance: Companies must update the Registrar with any amendments within 14 days (30 days for public listed companies) and keep records for at least 10 years.
• Penalties: Similar to LLPs, penalties range from KES 100 per day of default to a maximum of KES 500,000, with additional directives for compliance.

Additional Highlights of the Amendment Act

1. Consensual Extradition: Fugitive criminals can now consent to extradition without formal proceedings, facilitated through Mutual Legal Assistance, streamlining international cooperation in combating cross-border crimes, including terrorism.
2. Enhanced Regulatory Authority: The Capital Markets Authority (CMA) and Insurance Regulatory Authority (IRA) have expanded powers to ensure licensee compliance with anti-money laundering and terrorism financing laws.
3. Operational Independence for the Financial Reporting Centre (FRC): The FRC gains operational independence, exempting it from the definition of a State Corporation, to strengthen its capacity to combat money laundering.
4. Strengthened Reporting Obligations: Reporting entities must promptly report suspicious transactions to the FRC, which will analyze these reports and coordinate with law enforcement agencies for appropriate action.
5. Central Bank Supervision: The Central Bank of Kenya (CBK) will oversee financial institutions and agents of reporting institutions to ensure compliance with anti-money laundering regulations.
6. Expanded Scope and Coverage: The Act broadens the definition of money laundering offenses to include proceeds from domestic and international criminal activities, terrorism financing, and corruption, addressing emerging threats in digital and cryptocurrency spaces.
7. Increased Penalties and Deterrents: The amendments introduce more severe penalties, including higher fines and extended prison terms, to deter illicit financial activities.
8. Enhanced Customer Due Diligence: Financial institutions and designated non-financial businesses must conduct thorough customer due diligence according to Know Your Customer (KYC) standards, promoting transparency.
9. Harmonization with FATF Standards: The legislation aligns Kenya’s licensing regime with FATF standards, establishing global standards to combat money laundering, terrorism financing, and financing of weapons of mass destruction.

Conclusion

We hope this information is helpful in understanding the key benefits of the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act 2023. Please note that this newsletter provides a general guide and should not be relied upon without legal advice.

For further information or legal assistance on compliance or any other legal issue, contact us at info@wka.co.ke, visit wakilihub.co.ke/, or call +254 798 03 580. Our Nairobi Hub is located at Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road.

Authors:

• William Karoki, Founding Partner
• Florence Mwende, Lawyer