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anti money laundering act kenya

Introduction

The Anti-Money Laundering (AML) framework in Kenya is primarily governed by the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), 2009. This Act provides the legal and institutional framework to combat money laundering and the financing of terrorism. It establishes the Financial Reporting Centre (FRC) and outlines the obligations of reporting institutions, enforcement mechanisms, and penalties for non-compliance.

Table of Contents

  1. Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), 2009

    • 1.1 Objectives of POCAMLA

    • 1.2 Key Definitions

  2. Financial Reporting Centre (FRC)

    • 2.1 Establishment and Functions

    • 2.2 Powers of the FRC

  3. Obligations of Reporting Institutions

    • 3.1 Customer Due Diligence

    • 3.2 Reporting Obligations

    • 3.3 Record Keeping

  4. Enforcement Mechanisms

    • 4.1 Investigations and Prosecutions

    • 4.2 Freezing and Seizure of Assets

  5. Penalties for Non-Compliance

    • 5.1 Administrative Penalties

    • 5.2 Criminal Penalties

  6. Conclusion

1. Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), 2009

1.1 Objectives of POCAMLA

The primary objectives of the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), 2009 are:

  • To provide for the offence of money laundering and to introduce measures for combating the offence.

  • To provide for the identification, tracing, freezing, seizure, and confiscation of the proceeds of crime.

  • To establish the Financial Reporting Centre (FRC) and to provide for its functions and powers.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 3.

1.2 Key Definitions

  • Money Laundering: The act of a person who knows or ought reasonably to have known that property is or forms part of the proceeds of crime and enters into any agreement or engages in any arrangement or transaction with the intention of concealing or disguising the nature, source, location, disposition, or movement of the said property.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 2.

2. Financial Reporting Centre (FRC)

2.1 Establishment and Functions

The Financial Reporting Centre (FRC) is established under Section 21 of POCAMLA. Its primary functions include:

  • Assisting in the identification of the proceeds of crime and the combating of money laundering.

  • Receiving, analyzing, and disseminating information concerning suspected money laundering activities.

  • Educating the public and reporting institutions on matters related to money laundering.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 23.

2.2 Powers of the FRC

The FRC has several powers, including:

  • Compelling the production of documents and information from reporting institutions.

  • Conducting inspections of reporting institutions to ensure compliance with AML obligations.

  • Issuing directives to reporting institutions to take specific actions to prevent money laundering.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 24.

3. Obligations of Reporting Institutions

3.1 Customer Due Diligence

Reporting institutions are required to conduct customer due diligence (CDD) measures, which include:

  • Identifying and verifying the identity of their customers.

  • Understanding the nature of the customer's business and the purpose of the relationship.

  • Monitoring transactions to ensure they are consistent with the customer's profile.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 45.

3.2 Reporting Obligations

Reporting institutions must report suspicious transactions to the FRC. This includes:

  • Transactions that appear to be unusual or inconsistent with the customer's known legitimate business.

  • Transactions that have no apparent economic or lawful purpose.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 44.

3.3 Record Keeping

Reporting institutions are required to maintain records of transactions and customer identification for a minimum period of seven years. These records must be sufficient to permit the reconstruction of individual transactions.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 45.

4. Enforcement Mechanisms

4.1 Investigations and Prosecutions

The Act provides for the investigation and prosecution of money laundering offences. The FRC collaborates with law enforcement agencies to investigate suspected money laundering activities.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 53.

4.2 Freezing and Seizure of Assets

The Act allows for the freezing and seizure of assets suspected to be proceeds of crime. This includes:

  • Freezing orders issued by the court to prevent the disposal of suspected assets.

  • Seizure of assets by law enforcement agencies during investigations.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 68.

5. Penalties for Non-Compliance

5.1 Administrative Penalties

The FRC has the authority to impose administrative penalties on reporting institutions that fail to comply with AML obligations. These penalties may include fines and directives to take corrective actions.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 24.

5.2 Criminal Penalties

Individuals and institutions found guilty of money laundering offences face severe criminal penalties, including:

  • Imprisonment for a term not exceeding fourteen years.

  • Fines not exceeding five million shillings or the value of the property involved in the offence, whichever is higher.

Source: Proceeds of Crime and Anti-Money Laundering Act, 2009, Section 16.

Conclusion

The Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), 2009, provides a comprehensive framework for combating money laundering in Kenya. It establishes the Financial Reporting Centre (FRC) and outlines the obligations of reporting institutions, enforcement mechanisms, and penalties for non-compliance. By adhering to the provisions of POCAMLA, Kenya aims to prevent and detect money laundering activities, thereby safeguarding the integrity of its financial system.

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