Kenyan Lawyers now have the obligation to report clients involved in illicit financial activities, following an agreement signed between a lawyers’ association and the Financial Reporting Centre (FRC).
FRC officials informed Members of Parliament that the agency has reached a deal with the Law Society of Kenya (LSK) to withdraw a case that had been blocking the implementation of the Proceeds of Crime and Anti-Money Laundering (Amendment) Act. This act requires lawyers and their staff to disclose any suspicious financial transactions involving their clients.
Although the National Assembly approved the amendment in 2019, LSK filed a lawsuit through lawyer Omwanza Ombati, claiming that the changes could negatively impact practicing advocates.
FRC Director-General Saitoti ole Maika stated, “We have reached an agreement with LSK that it shall [regulate itself] and that lawyers will report on [transactions involving illicit funds]. The lawyers had raised an issue with the requirement that they report on their clients. They said this goes against client advocate confidentiality, but we have agreed in principle that the LSK will be the regulator.”
Mr. Ole Maika addressed the National Assembly’s Finance and National Planning Committee, which is gathering public opinions on the Anti-Money Laundering and Combating of Terrorism Financing (Amendment) Bill, 2023.
Sections 2(c) and 14 (b) of the Proceeds of Crime and Anti-Money Laundering Act designate lawyers and their employees, including accountants, clerks, and cleaners, as reporting agents for the FRC. The Act also identifies notaries and other independent legal professionals as reporting entities for transactions involving illicit funds.
The Proceeds of Crime and Anti-Money Laundering (Amendment) Bill, 2023 aims to amend section 36 of the principal Act to grant the LSK the authority to regulate, supervise, and enforce compliance with anti-money laundering (AML), combating the financing of terrorism (CFT), and countering proliferation financing (CPF) regulations for lawyers, notaries, and other legal professionals.
These amendments empower the LSK to conduct on-site inspections, demand the production of necessary documents or information, and impose penalties for violations. The LSK will also be required to share information with other agencies.
The Central Bank of Kenya (CBK) supports these proposed changes, warning that the country could be placed on the Financial Action Task Force (FATF) “grey list” if it fails to address deficiencies, including legal reforms, by October. Such a move could have adverse effects on international trade, transactions, and banking relationships due to high AML/CFT/CPF compliance costs, according to CBK Governor Kamau Thugge.
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