Kenya: Groups poke holes into money laundering Bill

Story by JEFF OTIENO
Publication Date: 2008/07/01

Human rights lobbyists have poked holes into the new Anti-Money Laundering Bill, insisting that far-reaching amendments need to be done before it is passed by Parliament.

The lobbyists, among them members of the civil society, lawyers and the media are now seeking to meet MPs to push for the amendment of the Bill.

And one of the proposals which they oppose vehemently is the placing of the proposed anti-money laundering agency under the Attorney General’s office.

Although the lobbyists support the idea that the Bill will, for the first time, introduce a nationwide scheme for recovering the proceeds of crime through civil proceedings rather than criminal courts, they insist that the agency must be independent.

Enormous powers

“The director of the investigation agency is too important an office to be appointed at the sole discretion of one individual, the Attorney General,” says lawyer Christopher Gitari of the International Commission of Jurists.

The Bill gives the AG enormous powers in the appointment of the head of the investigation agency.

The lobbyists say that the agency should have operational autonomy akin to that enjoyed by the Kenya Revenue Authority.

The Assets Recovery Agency, will be established to pursue the confiscation of assets both in Kenya and abroad. The resulting receipts will be channelled into a fund (Criminal Assets Recovery Fund) for fighting the vice.

It means that the agency will have the power to seize wealth acquired through criminal activity, including money in bank accounts, cars and houses.

Second reading

The Proceeds of Crime and Anti-Money Laundering Bill (2008) has already been tabled in Parliament and is in its second reading. It is currently being studied by parliamentary committees dealing with legal and financial matters.

The Bill aims at disrupting organised criminals, who often rely on cash transactions to fuel their businesses, by allowing officers to search persons and premises for criminal cash.

The document defines money laundering as a transaction with knowledge or having reason to have known that it involves proceeds of crime and has the effect to disguise or conceal such proceeds or ownership of it, assist a launderer to avoid prosecution and removing or diminishing such property.

It also makes it an offence to assist someone benefiting from proceeds of crime or failure to report, to the relevant authorities, those involved in the vice.

Other than let the AG have the leeway in appointing the director of the investigating agency, Mr Gitari argues that the recruitment be in two stages; the application and vetting stages.

The vetting, the lawyer adds, should be done by the relevant committee of Parliament “in this case the Committee on Legal Affairs and Administration of Justice”.

They say the record of the AG’s office in fighting crime has been wanting, adding that the agency needed to be given full autonomy.

“Similar agencies like the Law Reform Commission have been neutered in their independence and sundered in performance of their jobs by bureaucratic placement under the Attorney General,” adds Mr Gitari.

The Law Reform Commission was cited as one of the worst performers in the recently released audit on performance of ministries and government departments.

The Ministry of Gender and Sports scooped the top position in the ministries category while Kenyatta University was voted the best managed parastatal.

While releasing the results, Prime Minister Raila Odinga said the Law Reform Commission has been a major let-down to Kenyans, despite its critical role in the country.

Mr Gitari also says there is no reason why the director of the recovery agency must be a lawyer, as proposed by the Bill, adding that the office holder could be a person with other qualifications.

“The relevant skills are knowledge of money laundering issues, integrity and management experience to run such a sensitive agency. Legal knowledge should not be the only requirement,” he added.

To tighten the noose on suspected money launderers, the Bill proposes that a person conveying monetary instruments above $5,000 must report it to the relevant authorities.

Monetary instruments, as cited by the document, refers to notes, coins, travellers cheques, banker’s cheques, personal cheques, investment securities and money orders, among others.

Punishment for those found guilty, range from Sh1 million to Sh5 million in fines and between one year and 14 years imprisonment. The maximum penalty for an offender is 14 years imprisonment or a fine of Sh5 million or both.

Rights to secrecy will be overlooked on offences stipulated under the Bill, if it becomes law. It means that secrecy will not be a defence, if one is required to disclose all the information he or she knows about the crime.

However, despite the proposed harsh punishment for offenders, the lobbyists insist that investigators of the agency must remain independent, free from interference from any quarters if the fight against money laundering is to be won.

They argue that risks and enticements will be high for investigators, as their work will involve tracing and recovering cash and goods derived from crime.

According to the Bill, other powers will also include that of holding property at the start of a criminal investigation to avoid it being hidden or dissipated.

The anti-corruption lobbyists are also taking issue with the proposal on the recruitment of investigators, saying that it will weaken the agency.

According to the document, the director of the agency may, with the approval of the AG, get staff from other departments, on terms determined by the latter.

If allowed to pass, the human rights lobbyists argue that the agency runs the risk of being filled with individuals who will be easily manipulated by senior government officials.

“Those seconded to the agency might act based on the whims of individuals who aided them get jobs there,” says another lobbyists.

Nerve centre

Apart from the establishment of an Asset Recovery Agency, the Bill proposes the establishment of a Financial Reporting Centre and an Advisory Committee to advise the Government on how to combat money-laundering.

The Financial Reporting Centre will be an information gathering bureau and will act as the nerve centre for the investigation agency. This is because cases of any suspicious transactions and suspected underhand deals involving dirty money will be reported. It will rely heavily on banks and other financial institutions.

However, the document gives the Finance minister the power to appoint the director and deputy director of the Financial Reporting Centre on the advice of the Anti-Money Laundering Advisory Committee, which the lobbyists are also against.

“There is a risk that those appointed might not be the best persons for the job, but friends or close associates of the person occupying the Finance docket,” says Dr Charles Otieno, a governance consultant. He says cases where ministers have misused their powers by appointing incompetent persons to offices of authority are numerous.

“We must not let that happen in this case as we are dealing with a very sensitive issue,” Dr Otieno adds.

It is not only amendments targeting the Government that the lobbyists are pushing for. According to Mr Gitari, for the Financial Reporting Centre to be effective in its gathering of critical information for investigation, financial institutions ought to be barred from maintaining anonymous accounts. The lawyer argues that identifying customers is the cornerstone of anti-money laundering procedures.

In fact the Bill will require banks and other financial institutions to provide information on suspicious dealings and questionable accounts.

“Monitoring orders to banks or other financial institutions to provide transaction information on a suspected account will help financial investigators trace the proceeds of crime and investigate money laundering,” says Dr Otieno

The lobbyists urged the Government to establish a framework on how banks will provide information to the Financial Reporting Centre, adding that the information was crucial for investigators.

“The way to guarantee good data is to link the centre to other databases and to give it right to search them,” adds Mr Gitari.

Dr Otieno, also takes issue with the composition of the advisory committee, saying it is dominated by Government officials. “If the Bill is passed, 14 out of the 17 members in the advisory committee will be government officials. This compromises the independence of the advisory services that the committee will provide,” Dr Otieno says.

Among those proposed as members are permanent secretaries in the ministries of Finance, Foreign Affairs and Justice and Constitutional Affairs. Others are the Police Commissioner, Kenya Revenue Authority representatives and officials from the National Security Intelligence Service (NSIS).

Anti-corruption lobby group, Transparency International and Association of Media Women in Kenya (AMWIK), also fear a possibility of conflict of roles between the Kenya Anti-Corruption Commission and the proposed Assets Recovery Agency.

Under the Anti-Corruption and Economic Crimes Act (2003), KACC is mandated to recover assets acquired through corrupt activities, a role that will also be done by the Assets Recovery Agency.

Be superior

However, Dr Otieno explains that the proposed agency should be superior to KACC given the fact that it will deal with all types of money acquired illegally and not only that originating from corruption.

Other sources of money laundering that the agency will deal with are drug trafficking, prostitution, child trafficking and dealing in counterfeit and contraband goods.

The lobbyists are asking Parliament to make the necessary amendments to the Bill before passing it.

Dr Otieno says Parliament must ensure the Assets Recovery Agency has powers to tackle tax fraud. “It should also have powers to deal with persons whose income or gains were derived from crime,” he adds.


Source: Daily Nation