FRC eyes dirty cash hidden by lawyers in amendment

Financial reporting Centre (FRC) Director-General Saitoti Maik. FILE PHOTO | NMG

By CONSTANT MUNDA
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Summary

• The anti-money laundering watchdog has asked MPs to pass proposed changes to the law compelling advocates to disclose suspicious financial dealings of clients to help keep Kenya off the list of high-risk countries.
• The Financial Reporting Centre (FRC) fears continued non-designation of advocates among reporting agents for dirty cash deals might injure Kenya’s global rating in the ongoing assessment, which will conclude in February 2022.

The anti-money laundering watchdog has asked MPs to pass proposed changes to the law compelling advocates to disclose suspicious financial dealings of clients to help keep Kenya off the list of high-risk countries.

The Financial Reporting Centre (FRC) fears continued non-designation of advocates among reporting agents for dirty cash deals might injure Kenya’s global rating in the ongoing assessment, which will conclude in February 2022.

The Proceeds of Crime and Anti-Money Laundering (Amendment) Bill 2021 is seeking to include advocates, notaries and other independent legal professionals like agents, joining financial institutions, casinos, accountants and real estate agents in the fight against money laundering.

The National Assembly’s Departmental Committee on Finance and National Planning is presently receiving input from stakeholders and the public on the Bill, which went through its first reading on October 6.

“We are optimistic that whatever we are advancing is to address risks and vulnerabilities in our financial systems because they exist as the situation may be on the ground,” FRC director-general Saitoti ole Maika told the Business Daily.

“Parliament has its own wisdom that is normally guided by so many factors. I am hopeful they will pass the amendment to the law to provide for reports from lawyers.”

This comes at a time the Eastern and Southern Anti-Money Laundering Group is assessing the effectiveness of Kenya’s laws and policies to protect its financial system against money laundering and other crimes. The exercise is set to end in February.

If the changes to the law sail through, practitioners in law firms will be required to maintain a database of transactions from Sh1 million and report suspicious deals to the watchdog.

The FRC is targeting transactions relating to buying and selling of property, creation, operation and management of firms as well as management of bank, savings and shares accounts on behalf of clients.

The watchdog is making a second stab to include lawyers as its agents after a similar bid through the Finance Bill 2019 was shot down by lawmakers.

Speaker Justin Muturi ruled at the time that the changes be made via a substantive amendment to the anti-money laundering law.

The MPs and lawyers had protested the “offensive clause” in Finance Bill 2019 to amend the anti-money laundering law, arguing it violated other legislation such as section 134 of the Evidence Act.

and section 18 of Pocamla Act which safeguards client-advocate privileges.

“We hope we will get the support of the legal fraternity because parliament is more influenced by opinion in public interest,” Mr Maika said. “If a lawyer says it’s infringing on certain liberties, parliament will prosecute that.”

The Pocamla law, first enacted in 2009, has since undergone several amendments to address changing dynamics and include more non-financial institutions with potential to pose risks to the integrity of the global financial system.

“There’s no law which prohibits lawyers from making disclosure when someone is engaging in illegal activity,” Mr Maika said in an earlier interview.

“When you look at the amendment we are bringing we are not touching on anything which borders on litigation or information you give to a lawyer to advance your case in court.”