AML/CFT: Legal Framework- Kenya

The global financial landscape is influenced by efforts to combat money laundering (ML) and terrorist financing (TF). To maintain financial integrity and global cooperation, countries have had to agree on standards. This is where the Financial Action Task Force (FATF) standards come in. This article delves into the AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) regulatory regime of Kenya. It factors progress, feature Highlights, and areas of possible improvement.

Kenya's AML/CFT Regime

Kenya, as an emerging financial hub in East Africa, faces diverse ML/TF risks. Kenya's efforts to align with FATF standards indicate progress. At the same time it highlights areas that need review.

Proceeds of Crimes and Anti-Money laundering Act (POCAMLA)

The POCAMLA is the primary statute that defines, criminalizes and penalizes money laundering in Kenya.There are other legislations that support the legal POCAMLA framework include:

• The Companies Act, No. 17 of 2015 Laws of Kenya (the Companies Act);
• Limited Liability Partnership Act, No. 42 of 2011 Laws of Kenya (Limited Liability Partnership Act);
• Insurance Act, Cap 487 Laws of Kenya (Insurance Act);
• Capital Markets Act, Cap 485A Laws of Kenya (Capital Markets Act);
• Banking Act, Cap 488 Laws of Kenya (Banking Act);
• Central Bank of Kenya Act, Cap 491 Laws of Kenya (CBK Act); and
• Anti-corruption and Economic Crimes Act, No. 3 of 2003 Laws of Kenya.

Features and Progress

1. Technical Compliance and Effectiveness. These are divided into seven distinct areas:?AML/CFT Policies and coordination, Money laundering and confiscation, Terrorist financing and financing of proliferation, Preventive measures, Transparency and beneficial ownership of legal persons and arrangements, Powers and responsibilities of competent authorities and other institutional measures, and International cooperation. However,?implementation remains a challenge.

• Beneficial Ownership Transparency: Establishing a central repository for beneficial ownership information marks a significant step toward greater transparency.
• Use of Financial Intelligence: The Financial Reporting Centre (FRC) has been strengthened to better analyze and disseminate financial intelligence. Actual potential is not realized in combating ML/TF.

Reforms:

Beneficial Ownership Transparency: Kenya has established a central repository for beneficial ownership information through the provisions of the Companies Act. This marks a significant step toward greater transparency.

Risk-Based Supervision: Ongoing efforts are directed to review risk-based supervision to improve monitoring and enforcement.

Following the The Anti-Money Laundering and Combating of Terrorism Financing (AML and CFT) Laws (Amendment) ACT, 2023 (the Amendment Act) Kenya continues to show dedication to the improvement of its international cooperation. It has aligned its legal framework with global standards. Although, practical implementation and comprehensive supervision still face hurdles, particularly in the effectiveness of enforcement and regulatory measures, compliance becomes difficult to measure.

Conclusion

Kenya continues to make significant strides in enhancement of its AML/CFT regimes. Kenya continues to implement necessary reforms, albeit ongoing challenges in regards to effective implementation and comprehensive supervision. Continuous effort, effective enforcement, and sustained international cooperation remain crucial for any country in its effort to fortify their AML/CFT frameworks.