KENYA SETS HEFTY PENALTIES FOR BANKS AND FINANCIAL INSTITUTIONS DEFYING DIRTY CASH LAWS
Following the enactment of the Proceeds of Crime and Anti-Money Laundering (Amendment) Act, 2023 on 1st September 2023, The Central Bank of Kenya (CBK) via Circular number 13 of 2023 issued on November 6th 2023 instructed all the Chief Executive Officer or Principal officers of Banks, Foreign Exchange Bureaus, Money Remittance Providers and Digital Credit Providers to strictly comply with all the new AML/CFT laws and regulations or face hefty penalties in fines for non-compliance.
In the Circular, the CBK now require all financial institutions to widen their customer due diligence checks to include “significant shareholders.” In this regard the CBK now wants financial institutions while conducting customer due diligence to identify beneficial owners of legal persons. The law defines a beneficial owner as a natural person who ultimately owns a legal person or arrangement or a natural person on whose behalf a transaction is conducted or a natural person who ultimately controls a legal person or arrangement.
The Circular also requires reporting institutions (financial institutions) to always verify the identity of a person acting on behalf of another person in a transaction and that such person is duly authorized to act on that behalf.
The CBK has also been given powers to compel reporting institutions (financial institutions) to produce such documents or information that proves compliance with the AML/CFT laws.
On monetary penalties, the CBK now has powers to impose penalties for institutions that fails to comply with the Proceeds of Crime and Anti Money Laundering Act (POCAMLA), Regulations therein, rule, guidelines and other directions issued under the POCAMLA. In this regard, the CBK can now impose a penalty of Kshs. 20,000,000.00 for legal persons and Ksh. 1,000,000.00 for natural persons in the Banking Industry who fail to adhere to the AML/CFT legal and regulatory framework.
In the Money Remittance Providers, Foreign Exchange bureaus, Digital Credit Providers and Microfinance Banks sector, the CBK can now impose a penalty of Kshs. 5,000,000.00 for legal persons and Kshs. 1,000,000.00 for natural persons failing to comply with the AML/CFT laws.
Where the violation is of a continuing nature, the CBK has powers to impose Kshs. 100,000.00 for each day the violation continues.
The CBK has therefore called on all stakeholders in the financial sector to strictly adhere to the AML/CFT laws to avoid these hefty penalties and insisted that the penalties will be applicable directly to Directors, Officers, Employees or Agents who fails to comply with the AML/CFT/CPF laws.
Furthermore, the CBK has called on financial institutions to continuously monitor transactions conducted by Lawyers on behalf of their clients given the high risk of exposure in the legal circles. This is after the Law Society of Kenya agreed to act as a reporting institution and a self-regulatory body for lawyers in the fight against dirty cash.
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