MONEY LAUNDERING OFFENCES AND LIABILITIES

Last week, we delved into the obligations of reporting institutions in combating money laundering. In this edition, we shift focus to the offenses and liabilities under Kenya’s Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), highlighting key provisions and notable prosecution cases.

Key Offences Under POCAMLA

Kenya’s legal framework on money laundering criminalizes various activities to deter illicit financial flows. The Proceeds of Crime and Anti-Money Laundering Act (Cap. 59A) outlines the following key offences:

1. Money Laundering: Engaging in transactions that conceal or disguise the nature, source, location, disposition, or ownership of property derived from criminal activity is a serious offence. This includes knowingly handling or transferring illicit funds to integrate them into the legitimate economy.
2. Acquisition, Possession, or Use of Proceeds of Crime: Holding, using, or benefiting from property obtained through unlawful activities, while knowing or having reasonable grounds to suspect its criminal origin, is punishable under POCAMLA. Individuals and businesses must exercise due diligence to avoid handling illicit assets.
3. Failure to Report Suspicious Transactions: Financial institutions, real estate agents, casinos, and other designated entities are required to monitor transactions and report suspicious activity to the Financial Reporting Centre (FRC). Failure to do so attracts heavy penalties.
4. Financial Promotion of an Offense: Facilitating money laundering through financial services, transfers, or transactions designed to disguise illicit funds is a crime. This applies to both individuals and corporate entities that knowingly assist in laundering money.
5. Tipping Off: Disclosing to a suspect that they are under investigation for money laundering compromises law enforcement efforts and is strictly prohibited. Individuals who leak information about ongoing probes can face criminal charges.
6. Misrepresentation: Providing false, fictitious, or fraudulent statements to regulatory authorities, banks, or other financial institutions is a criminal act. This includes falsifying transaction records, identity documents, or other financial disclosures.
7. Malicious Reporting: Intentionally filing false reports of suspicious transactions with the authorities to mislead investigations or target individuals unfairly is also a punishable offense.
8. Failure to Comply with Anti-Money Laundering Measures: Institutions that neglect their due diligence obligations, customer identification procedures, or record-keeping requirements face penalties under the law.
9. Hindering an Investigation: Obstructing authorities in their efforts to track, seize, or investigate suspected proceeds of crime is a serious offence, warranting severe punishment.

Penalties for Individuals and Corporate Entities

POCAMLA imposes stringent penalties for those found guilty of money laundering offences: Individuals:

• Engaging in money laundering through transactions that disguise illicit funds can lead to imprisonment for up to 14 years or a fine of KSh. 5 million (or the value of the laundered property, whichever is higher).
• Failure to report suspicious transactions can result in 7 years imprisonment or a fine of KSh. 2.5 million.
• Tipping off a suspect under investigation is punishable by imprisonment for up to 7 years or a fine of KSh. 2.5 million.
• Providing false information to financial institutions or regulatory bodies can result in 2 years imprisonment or a fine of KSh. 1 million.

Corporate Entities:

• Companies involved in money laundering face fines of up to KSh. 25 million or an amount equivalent to the value of laundered property.
• Continued violations attract daily fines of KSh. 10,000 per day, with a maximum period of 180 days.
• Senior officers who knowingly engage in or facilitate money laundering may be held personally liable and prosecuted.

Notable Money Laundering Cases in Kenya

?1. The Windward Trading Case

This case involved an international collaboration between Kenyan and Jersey authorities to recover approximately USD 3.7 million in illicit funds. The money, held in the account of Windward Trading Ltd, originated from corrupt dealings in Kenya’s power sector. The directors of Windward Trading were implicated in facilitating illicit financial transactions, leading to severe reputational damage and legal consequences. The company itself was charged with money laundering offenses, resulting in the confiscation of its assets and a legal precedent in transnational financial crime enforcement. Following legal proceedings, the funds were repatriated, reinforcing the importance of stringent AML measures.

2. The Jimmy Kiamba Case

Jimmy Kiamba,?former Chief Finance Officer of Nairobi County, was found guilty of amassing unexplained wealth through corrupt procurement deals. The government successfully secured both a civil asset forfeiture order?for?around USD 3 Million in assets and a criminal conviction under POCAMLA.?

Conclusion

POCAMLA provides a robust legal framework for combating money laundering in Kenya. The stringent penalties and notable prosecutions highlight the government’s commitment to enforcing compliance. As the fight against financial crime intensifies, institutions and individuals must remain vigilant in fulfilling their obligations to prevent legal repercussions .

Stay tuned for the next edition in our AML series as we explore the role of the Financial Reporting Center in combating money laundering.

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