Anti-Money Laundering: Enhanced Customer Due Diligence

Posted on October 23rd, 2018

By Noella Lubano | Geoffrey Muchiri

Overview

The Proceeds of Crime and Anti-Money Laundering Act, 2009  (POCAMLA) provides for the offence of money laundering and introduces measures for combating the offence. One such measure is that financial institutions, estate agencies and designated non-financial businesses or professions such as casinos and dealers of metals and stones (collectively, the reporting agencies) are under duty to verify customer identity and to undertake customer due diligence on existing customers or clients. Parliament has now raised the bar of this duty.

Enhanced Customer Due Diligence 

Through the Finance Act, 2018, the reporting agencies shall  apply enhanced customer due diligence on business relationships and transactions with any person or company originating from countries identified by the Financial Action Task Force (FATF) as high risk of money laundering.

Further, the reporting agencies shall apply appropriate counter measures, proportionate to the risk profile of the countries subject to FATF or as advised by the Cabinet Secretary for Finance. These countermeasures include:

  • limiting or terminating business relationships or financial transactions with persons or companies, legal arrangements, or financial institutions located in high risk countries;
  • prohibiting reliance on third parties located in the high risk countries to conduct customer due diligence;
  • applying enhanced due diligence measures on correspondent banking relationships with financial institutions located in the high risk countries;
  • when considering the establishment of subsidiaries, branches or representative offices of financial institutions from high risk countries, reporting institutions shall take into account whether the financial institution is domiciled in a high risk country; and
  • submit a report listing customers and legal arrangements, originating from high risk countries to the Financial Reporting Center on an annual basis.

Conclusion

POCAMLA demonstrates the government’s commitment to enforce measures in sealing the gaps in the legislation with the increase of innovative financial startups and money remittance systems. The increased compliance procedures, due diligence requirements and counter measures will ensure both compliance with the law and maintain growth of the Kenyan economy.


Should you require further information on the POCAMLA, 2017 please contactNoella Lubano or Geoffrey Muchiri

Penalties for Non-Compliance With the Retirement Benefits Act, 1997

Posted on October 17th, 2018

Parliament amended the Law on Retirement Benefits through the Finance Act, 2018 following its enactment on September 21, 2018. Changes specific to the Retirement Benefits Act, 1997 were back-dated to July 1, 2018.

Below, we highlight some of the key changes:

Trustees

Trustees who fail to submit a copy of audited accounts to the Retirement Benefits Authority (RBA) will be penalised Kenya Shillings One Hundred Thousand (KES 100,000), and where the returns remain unsubmitted, an additional fine of Kenya Shillings 1,000 (KES 1,000) for each day or part thereof during which the returns remain unsubmitted.

Fund managers

Fund managers who fail to submit an investment return to the RBA by the due date will be penalised Kenya Shillings Ten Thousand (KES 10,000), and where the returns remain unsubmitted, an additional fine of Kenya Shillings 1,000 (KES 1,000) for each day or part thereof during which the returns remain unsubmitted.

Administrators

Administrators who fail to submit an investment return will be penalised Kenya Shillings Ten Thousand (KES 10,000), and where the returns remain unsubmitted, an additional fine of Kenya Shillings 1,000 (KES 1,000) for each day or part thereof during which the returns remain unsubmitted.

Employers

Where there is non-remittance by an employer, the RBA will direct the employer to pay the contributions and interest accrued to the scheme in full within a specified period as well as a five per cent (5%) penalty on unremitted contributions or Kenya Shillings Twenty Thousand (KES 20,000), whichever is higher and paid within seven (7) days of receiving a notice.

The RBA will also issue a temporary cessation order from deductions from employees until the employer is able to remit the employee emoluments. If the employer is unable to remit as required, the RBA will facilitate members to join other schemes where their contributions shall be remitted.

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