EDITORIAL: Company disclosure rules long overdue

Editorials

EDITORIAL: Company disclosure rules long overdue

Thursday, March 5, 2020 0:01

By EDITORIAL

Until very recently, it was fairly easy to handle dirty money in the economy and invest in several sectors—notably real estate—and easily get away with it. It is not like the situation has fully been addressed but quite a number of laws have been enacted to make such crimes less than a walk in the park.

These include the Anti-Money Laundering Act 2012 and changes to proceeds of crime laws allowing authorities to seize assets of the offenders even in the absence of conviction. Indeed, before that authorities were in a big dilemma resulting in the controversial closure of the likes of Charterhouse Bank for reportedly handling illicit cash. The bank’s financial health remains under the Central Bank of Kenya statutory management nearly 14 years later as the anti-money laundering laws were not in place.

But the impact of dirty cash has been there for all to see. From inflating and distorting the price of land for investors in the city to misallocation of resources in the economy, the chickens are coming home to roost. That is why we applaud continuous efforts by the authorities to tighten the screws on dodgy investments to derisk the economy.

In the latest installment, the government in new regulations wants owners of nominee accounts owning a least 10 per cent of companies to, among others, disclose their home addresses and phones.

It will be recalled that sometime back, the Capital Markets Authority ordered the identities of the nominee account holders be disclosed to the authority. But that does not seem to have worked properly given that private companies dominate the economy, requiring more disclosures. The new regulations will see secret shareholders’ names revealed besides Kenya Revenue Authority PIN, national ID and passport details as well as the dates the investor became a beneficial owner.

Companies will be forced to make disclosures or limit the benefit for the owner. Notably, this will help the taxman catch up with a lot of people who only pay taxes through the regulated companies without really disclosing the sources of funds and what else they own.

Hopefully, the changes to the Companies Act will also level the ground for investors who play by the rules but end up being disadvantaged. The State should by all means help clean up the business environment.