Kenya: Fix loopholes in AML bill

They are a common feature in almost every society on earth; those overnight millionaires without known employment or businesses.

And they lead profligate lives. One would think planting cash was their profession. But, nay, most of them indulge in criminal activities such as drug pushing, pyramid investment schemes, corruption, computer fraud, child trafficking and gun running.

It is money got from such unlawful ways that they clean (launder) by concealing sources, then transfer to local and foreign banks or legitimate businesses.

Kenya’s economy is still reeling from the devastating effects of last year when several pyramid schemes collapsed with depositors’ billions of shillings.

It was not an isolated event the world had seen in recent years. In the Philippines, for example, close to two million people invested in pyramid schemes, having been promised weekly returns as high as 60 per cent. The hapless investors poured in their pensions, cash from abroad, and even sold homes to increase personal stakes.

The schemes collapsed with about US$ 1.4 billion of investors’ money, with their effects rippling over the entire country. Forced to repay the loans, police officers resorted to extortion while on patrol, while destitute investors turned to criminal activities.

In Albania, pyramid schemes collapsed between 1996 and 1997 when the investments accounted to a half of the country’s Gross Domestic Product. Big players of the schemes transferred out of the country more than 93 per cent (US$500 million) of its deposits.

The collapse of the schemes caused a civil war in which 2,000 people were killed and 3.5 million others displaced.

In Kenya, experts have argued that some of the economic scandals that have taken place such as Goldenberg and Anglo Leasing were examples of high-level money laundering.

It is for this reason that a number of organisations have been rooting for legislation to fight money laundering. They include the Centre for Governance and Development, the International Commission of Jurists and some members of the Parliamentary Initiatives Network.

The government first introduced the Proceeds of Crime and Anti Money Laundering Bill in 2006 but it lapsed after the First Reading (formal introduction). It was re-tabled last year but it was frozen with the end of the life of the Ninth Parliament last November.

I sighed with relief when MPs concluded debate on the Bill last Thursday upon its re-introduction, then referred it to two departmental committees for fine-tuning. The Bill awaits scrutiny by members of Finance and Trade committee on one hand, and those of Administration of Justice and Legal Affairs on the other.

It is instructive that some MPs already raised the red flag over the Bill, saying it was the work of the USA and foreign multilateral donors. I leave that to the Finance minister Amos Kimunya to explain, but my take is that Kenya urgently needs a law to fight money laundering.

But first, the highlights of the Proceeds of Crime and Anti-Money Laundering Bill, 2008.

It has a number of clauses defining acts that will be deemed as money laundering, associated offences and property that will be seen as having been acquired through criminal activities. They shall include assisting criminals hide properties acquired unlawfully as well as aiding others to benefit from proceeds of crime.

If enacted, the Bill provides that it shall be a crime to acquire or possess proceeds of crime. Anyone who fails to report any suspicion regarding the proceeds of crime will have committed an offence. To knowingly transport, transmit, transfer or receive a monetary instrument or anything with the intention of committing an offence will be illegal.

Giving tips to suspects of money laundering or providing false information to officials or bodies regulating the Act shall be an offence. Transmitting more money or monetary instruments (travellers’ cheques, personal cheques, bank cheques, money orders, investment securities, etc) into or out of Kenya shall be declared in a prescribed form at the point of entry or exit.

There are to be set up entities to implement the Bill if passed into law: The Financial Reporting Centre, the Anti-Money Laundering Advisory Committee, the Assets Recovery Agency, and the Criminal Assets Recovery Fund. The he Financial Reporting Centre is to identify proceeds of crime and fight money laundering, while Anti-Money Laundering Advisory Committee or of Financial Reporting Centre.

The Assets Recovery Agency shall be a semi-autonomous outfit under the Attorney General, charged with the duty of recovering any proceeds of money laundering. It shall also administer the monies of Criminal Assets Recovery Fund.

However, the Bill has so many weaknesses that the departmental House and MPs should fix before passing it. Last year, the Centre for Governance and Development hinted at most of the loopholes in its July edition of Bills Digest.

For example, the Bill has no links with other offences that may generate proceeds or assets that may become the subjects of offences under the proposed law. The UN Convention against corruption refers to such vices as predicate offences and they include organised crime, terrorism, human, drug, and arms trafficking, extortion, forgery, fraud, insider trading, and kidnapping.

Secondly, due to the complex nature of money laundering, the Bill should block avenues used by money launderers to dodge justice on legal technicalities. It should also lengthen the minimum period within which legal proceedings may be initiated. That is the case in best international practices.

It should also compel reporting institutions to develop a policy on training staff on money laundering and also criminalize anonymous accounts and those that are obviously in fictitious names.

The Bill should make specific provisions for those vulnerable to money laundering such as the Head of State, ministers, politicians, top private company bosses, senior public servants, judicial, military and other uniformed officers.

And records containing information on active customer accounts should not be destroyed after seven years as proposed by the Bill.

And, pray, why should most members of the proposed 17-member Anti-Money Laundering Advisory Committee be busy, senior public servants? This gives the government undue power and influence over the committee.

There is no reason why the Assets Recovery Agency should be under the Attorney General who shall also appoint its director. The agency should be delinked from the AG for independence, while its director ought to enjoy security of tenure.

This is is a timely piece of legislation.

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