KENYA: AML Bill Passes, But Does Govt Mean Business?

Kenya's Parliament finally passed the Proceeds of Crime and Anti-Money Laundering Bill in December. But while the passing of the bill is viewed as a highlight of the Tenth Parliament, many fear it may just be a gimmick by the government to appease international partners.

George Kegoro, the executive director of International Commission of Jurists - Kenya Chapter, says while the legislation is good, he doubts there is political will to completely stamp out money laundering in Kenya.

"The existence of the legislation is not sufficient to deter the vice neither are the stiff penalties that are recommended in the bill," he says. "There is need for genuine support from the government to enact this law. We need a good set of people to be put in place to interpret the legislation."

Kegoro, whose organisation undertakes advocacy and policy work aimed at strengthening the role of lawyers and judges in protecting human rights and the rule of law, argues that while the bill was government-sponsored, Kenya’s track-record on corruption is poor and he doubts the genuineness of the political class.

It is the fourth attempt since 2004 to pass a bill to prevent the concealment of large profits from drug trafficking and other organised crime, and even this time around it faced resistance from members of parliament who believed the bill was a sly back-door re-introduction of an Anti-Terrorism Bill which had been quashed.

When the bill was tabled in November, an assistant minister in defiance of his own government, strongly opposed the tenets of the Bill. The assistant minister for public service, Aden Sugow, opposed the Bill saying it was an attack on the Muslim community. He argued implementing the Bill would be bowing to the interests of external interests and said that Kenya currently has adequate laws in place to deter money laundering.

While supporting the bill, defence minister Yusuf Hajji warned of a general feeling among the Muslim community that the legislation was targeting them. The Bill went forward after assurances from Prime Minister Raila Odinga that the government had no such intentions.

Once signed by the president, the law will establish a Financial Reporting Centre to assist in the identification of the proceeds of crime. An Asset Recovery Agency will be charged with tracing and recovering ill-gotten assets.

According to Job Ogonda executive director of international corruption watchdogs Transparency International, this would mean millions of dollars stashed in off-shore accounts swindled from Kenya could be recovered.

But Ogonda doubts the passage of new legislation will improve Kenya’s standing as a corrupt state internationally.

"At the moment it is embarrassing to be a Kenyan. Nigeria is improving with regards to corruption because they have shown tangible commitment of doing something about graft. However, the same cannot be said for Kenya," he says.

"We have previously had good pieces of legislation which would have helped fight graft, however, nothing has been done. How many ministers or former ministers have ever gone to prison because of corruption?" Ogonda wonders.

Ogonda is referring to anti-corruption legislation such as the Public Procurement and the Public Officers Ethics Act which require all public office holders to declare their wealth and origin of the same: this older legislation has had no noticeable effect.

Kenya’s record internationally as a corrupt state has for many years been bad and in the bribery and corruption index released by Transparency International, the country has kept the company of states such as Nigeria, Russia and Zimbabwe. Currently, Kenya is position 147 out of 180 on the global index of corruption.

Indeed the passing of the anti-money laundering bill comes in the wake of the release of a U.S. State Department report saying 93 million dollars of earnings from drug trafficking are laundered in the country’s financial system annually.

Another equally damning report by a UK firm, Kroll Associates, hired by the Kenyan government to track wealth acquired corruptly, revealed an estimated $1.7 billion is currently stashed in off-shore accounts. While the results of this 2004 report have remained confidential, the document was leaked: no action has been taken against any of the prominent figures named in its 110 pages.

But all the right noises were made when the bill was moved in Parliament by deputy Prime Minister Uhuru Kenyatta, who said that in view of the magnitude of the problem to the economy, the debate should focus on the quality of the legislation to ensure it was stringent enough.

Seconding the bill, Raila said, "The country risks becoming a pariah state unless the legislation is passed. We have suffered from the effects of money laundering especially in the property sector whose value has been skyrocketing due to the money being brought from the acts of piracy off the coast of Somalia".

A boom in property prices in Nairobi is preventing a majority of Kenyans from buying real estate, and in some cases even pricing locals out of the rental market. Media reports are linking the boom with profits from Somali pirates who seized numerous vessels during 2009, extracting handsome fees from their owners before releasing ships and crew members. In certain Nairobi neighbourhoods, Somalis are willing and able to pay rent up front for periods of even up to two years.

Ogonda states that for many years, Kenya has been a hub of money laundering with illegally acquired cash from Europe, South Africa, South America, Democratic Republic of Congo, Sudan, Rwanda, Burundi, Uganda and Tanzania finding its way into local financial markets.

"Due to our porous borders and poor implementation of legislation, people have simply walked in with huge amounts of cash, hired a lawyer to front for them who in turn invest the cash, especially in property," Ogonda says.

He says despite moves to assure the independence of the new watchdog agencies' leadership, and fresh monitoring requirements for the banking system, the version of the bill which is now awaiting presidential assent does not demand greater accountability from lawyers whose lawyer-client privileges remain intact.

Kegoro notes that the prescribed penalties are fairly high - jail terms of two to five years, with fines of up to $65,000 for individuals, and corporate penalties set as high as $330,000 or the value of the property. But, he argues, it is not the severity of the penalty that will make people fear it. It is the certainty of being caught, hence the need for genuine political will to implement the law.

Ogonda is in agreement. "Application of the bill is what will be the determining factor. The structure of governance has to support the law and if it remains the same the legislation can exist and nothing will change."

By Susan Anyangu-Amu

Source: IPS

Rwanda: 'Dirty Money' - Banks, Businesses Be Alert

If the money laundering law, meant to curb dealing in 'dirty money' is still with Parliamentarians, then there is need for everybody to be on high alert.

Money laundering is when criminals conceal unlawful funds by converting them into seemingly legitimate income. That is "making dirty money clean".

While the term refers to the monetary proceeds of all criminal activity it is most often associated with the financial activities and drug traffickers who seek to launder large amounts of cash generated from the sale of narcotics.

Combating

So, those charged with combating crime, especially police, their mandate is to identify, assess, restrain and forfeit illicit and/or unreported wealth accumulated through criminal activities. But the question remains how does such agency (police) get relevant information?

To combat crime, their is need to bring together the skills, knowledge, and abilities of a diverse group of experts, including police investigators, bankers, and lawyers from the department of justice, forensic accountants, and representatives from other relevant agencies in the country and customs officers.

It is important for businesses to be informed about how they can be used to launder money, and how they can help to make it more difficult for criminals to prosper, especially financial institutions which are more susceptible to money laundering.

Some regulators require banks to collect information from customers, monitor their accounts, and report "suspicious" activities. And if you don't give the bank the information it wants, you could forfeit your account.

Some critics see this system of know your customer (KYC), as treating people as suspects instead of as good citizens.

New rules in respect to combating money laundering are needed to ensure the "safety" and "reputation" of the banking system. Banks have managed to respect their customers' privacy for decades without endangering the "safety" of the banking system.

Government's role

To combat money laundering, government must inform the public about the vice and enact laws to curb it. However to most businesses, money laundering is something that happens somewhere else, involving only criminals. But the truth is; it can happen anywhere, anytime, and you may not even be aware that you have been involved.

Know your customer (KYC)

In the recent years, prevention of money laundering has assumed greater importance. In this direction, adoption of know your customer (KYC) principle is a step further towards combating money laundering and financing of terrorism.

Take into account any abnormal circumstances in a transaction that indicate that the export may be destined for an inappropriate end-use, end-user, or destination and unusual transactions on your customers' accounts. Such circumstances are referred to as "red flags.

Businesses should have started by now to formulate a KYC policy. Banks should ensure that KYC procedures are applied to all existing accounts of individuals, companies/firms, religious/charitable organisations and other institutions.

Do not turn a blind eye

Employees need to know how to handle "red flags." This makes it important for firms to establish clear policies and effective compliance procedures to ensure that such knowledge about transactions can be evaluated by responsible senior officials. Failure to do so could be regarded as a form of self-blinding.

Rwandans need not overlook such dangerous acts. Some may think that such high level crime like money laundering can not take place in Rwanda. Stay on the alert, such incident could challenge our economy.

http://allafrica.com/stories/200801020556.html

East Africa turns to training to confront money laundering

East African countries have admitted they are vulnerable to global money laundering. They are calling for specialised training and increased information sharing to confront the ogre.

A peace and security conference for the East African Community (EAC) in Kampala, Uganda last week, agreed that the region’s security agencies should be computer literate as technology becomes the more preferred channel for committing certain crimes.

The admission gives hope that the region will strengthen its anti-money laundering laws.

“Countries in the region need to do everything in their power to adopt the international standards pertaining to greater scrutiny of financial transactions,” said a communiqué from the conference.

“Client due diligence, honing and sharpening the technical and technological skills of investigators and enforcers, as well as intensifying information sharing between nations and agencies.”

Kenya is yet to make an anti-money laundering law despite the exposure to criminals like the pirates in the Indian Ocean, who have admitted using Kenya and Dubai as their preferred money laundering destinations.

The proposed law is yet to be debated in parliament.

In Uganda, it is only last month that the draft Anti-Money Laundering (AML) Bill was presented to Uganda’s Parliament, where it will be debated over the next two months.

Rwanda Parliament last year approved anti-money laundering and combating the financing of terrorism law.

With the law in place, a Financial Intelligence Unit (FIU), a national agency charged with receiving, processing, analysing and disseminating information relating to suspect financial transactions is to be formed.

It was not clear if this unit has already been formed but, it is such agencies that are expected to be formed across the region to facilitate exchange of information on suspicious financial transactions.

Source: Africa Business Daily by Steve Mbogo