Wash-Wash Businesses on the Line? An insight on the Proceeds of Crime and Anti-Money Laundering Bill

Introduction

The National Assembly, Parliament of Kenya, on a special sitting held on Tuesday, 21st December 2021 passed the Proceeds of Crime and Anti-Money Laundering Amendment Bill, 2021 (The Bill) sponsored by the Leader of Majority Party, Hon. Amos Kimunya, MP. The Bill is seen as a blow to the businesses considered to be engaging in wash-wash kind of businesses such as investment frauds with deceptive practices of luring unsuspecting victims to invest in unscrupulous schemes and also those that conceal illicit sources of assets obtained by criminal and unlawful activities to obscure the linkages existing between the funds and the original criminal and unlawful activity.

The Bill has been transmitted to the Senate for consideration as it touches on the Counties.

Overview of the Bill

The Bill features the designation of Advocates, Notaries and other Independent Legal Professionals who are sole practitioners, partners or employees within professional firms as Reporting Persons for the purposes of the Act. The reporting authority includes in respect of buying and selling of real estate, managing of client's money, securities or other assets, management of bank savings or securities accounts, Organisation of contributions for the creation, operation or management of companies and the creation , operation and management of buying and selling of business.

The Bill introduces the Financial Reporting Center with the authority to intervene whenever it has reasonable grounds to suspect that a transaction is unlawful with the aim of ensuring timely access to information on assets held by criminals as a preventive and a repressive measure and ultimately to disrupt the criminal network and the unlawful activities. Headed by the Director General.

Further the Bill establishes the Assets Recovery Oversight Board, which oversights the Agency, composed of the Attorney General who is the Chairperson of the Board, the Principal Secretary Ministry of Finance, the Director of Public Prosecutions, the Directors-General of National Intelligence Service, the Financial Reporting Center and the Assets Recovery Agency and the Director of Criminal Investigations.

The Bill seeks to limit the Right to Privacy under Article 36 of the Constitution of Kenya with respect to the prevention, detection and investigations of money laundering and financing of terrorism.

Lastly, the Bill introduces in the list of institutions with supervisory authority under the Act the Law Society of Kenya and the Sacco Societies Regulatory Authority. Other institutions under the Act include the Central Bank of Kenya, the Capital Markets Authority, the Betting and Licensing Control Board, the Institute of Certified Public Accountants of Kenya, the Estates Agents Registration Board, the NGO Coordinating Board and the Retirement Benefits Authority. They are gatekeepers in their respective authorities to ensure persons moving unscrupulous money, unaccounted for and with no clear sources are reported.

The Impact of the Bill

Once passed by the Senate, the Bill shall have the following effects:-

1. The Bill overshadows the Advocate-Client privilege of confidentiality. The privilege is provided for under the Advocates Act which prohibits Advocates from divulging material information from their clients with third parties, breach of the same amounts to professional misconduct. However, under the Bill, Advocates will be under a statutory obligation to report clients with unscrupulous businesses or finances whose sources are not clear. The Law Society of Kenya will supervise Advocates to ensure the compliance with this obligation.

2. Limits the Right to Privacy without the input of the Constitutional safeguards that have been provided for under Article 24 of the Constitution. For instance, the law provides that agencies must seek a High Court order allowing them to access bank statements of any suspicious bank account. This is to protect the right to privacy and that to limit that right, reasonable grounds must be demonstrated before a High Court judge. This may not be the case under the Bill with the Center given powers to directly intervene where a transaction is suspicious. Article 24 provides that a right shall not be limited except by law, and then only to the extent that the limitation is reasonable and justifiable in an open and democratic society based on equality and freedom. The arising question therefore would be whether the limitation would be reasonable and justifiable in an open and democratic society.

3. Enhances the Monitoring of transactions by the multi-agency sitting as the Assets Recovery Oversight Board. The Board has heads of cross cuttings agencies in its composition, from the investigative entities, to the Prosecutors and the policy makers and the government legal advisor. Impliedly, the multi-agency board will enable enhanced monitoring of transactions which are potentially suspicious.

Are Wash-Wash Businesses on the Line?

As discussed in the introduction, wash-wash businesses also known as money laundering would include actions such as investment fraud, which include engaging deception and luring unsuspecting victims to invest in schemes intended to steal from them and the concealment of illicit sources of money or assets that have been obtained by criminal activities or obscuring the linkages that exist between funds held in cash or at bank and the criminal or unlawful activities.

With the enactment of this Bill inevitable, such Businesses will be on the line. This is why:-

Aside from the other professionals listed as Reporting persons, on the listing of Advocates as reporting persons and the eventual removal of the Advocate-Client confidentiality privilege, all transactions that require the execution of Advocates such as the buying and selling of real estate, the management of client's money, securities or other assets and the creation, operation or management of buying and selling of businesses will be reported by the Advocate to the Financial Reporting Center if they do not comply with the provisions of the Act and in particular, where the sources of funds used in such transactions are not properly accounted for. Advocates must execute Sale Agreements and the Transfer Deeds for the purchase of land, vehicles, sectional property and businesses e.t.c which anyone blessed of money would want to partake in owning.

With the introduction of the limitation of Right to Privacy, proceeds of crime hidden in bank accounts and different businesses will be accessed by the Center quite easily with the full force of the law with little suspicion and without the obtaining of High Court order. Hence, money launderers may end up with the option of keeping their laundered money in cash, which they may not use in the purchase of real estate and businesses as they will be put through the rigorous accounting procedures by professionals listed in the Act, and now would include Advocates and Officials of Sacco Societies.

Conclusion

Many money launderers had found a safe haven in Advocates and the greatest protection of the Bill of Rights under Constitution of Kenya 2010 but now this may turn to be turbulent with the actions of the legislator to amend the Proceeds of Crime and the Anti-Money Laundering Act, 2009.