State to legalise phone, email tapping in dirty cash fight

Finance Bill

Members of the National Assembly during a sitting . FILE PHOTO | DENNIS ONSONGO | NMG

Telephone calls and emails of Kenyans suspected to be dealing in money laundering and terrorism financing will be tapped if lawmakers approve changes to a Bill seeking to escalate the fight against terrorism and dirty money deals in the country.

The parliamentary committee on Finance proposed the changes to the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023 on Wednesday seeking to legalise the bugging of suspects’ private communication.

The proposal, if adopted by the House, will give the State security machinery unfettered access to private communications of suspects in money laundering and terrorism financing.

Currently, State agencies are not legally allowed to tap the private communications of persons suspected of involvement in dirty money deals and terrorism financing.

“Where a person is suspected or accused of an offence under this Act, the privacy of a person’s communications may be investigated or otherwise interfered with,” says the proposed amendment.

The new clause touches on five laws that are being amended through the Bill.

These are the Insurance Act, the Banking Act, the Central Bank of Kenya Act, the Capital Markets Act and the National Payments Systems Act.

The Cabinet approved the Bill last month, paving the way for its introduction in Parliament. Kenya has since the start of the year sought to beef up the fight against money laundering and terrorism financing, with the Treasury forming a task force to review related policies, strategies, and legislation in April.

The proposed amendments follow last year’s enactment of the Proceeds of Crime and Anti-Money Laundering (Amendment) Act.

A report by the Eastern and Southern Africa Anti-Money Laundering Group last year singled out Kenya for not prosecuting people involved in money laundering and terrorism financing, highlighting the need to beef up the investigative capacity.

The group’s members include the World Bank, the International Monetary Fund (IMF), US and the United Kingdom.

Read: Money laundering war must continue

“A poor understanding of money laundering risks, lack of collecting statistics on different money laundering types and the prioritisation of the prosecution of predicate offences, especially corruption, over money laundering have limited Kenya’s ability to effectively investigate and prosecute ML cases in line with its risk profile,” said the report.

“Terrorist financing is not integrated as a component of the wide-ranging efforts to tackle the severe and fatal terrorist risk suffered by Kenya.”

The IMF, a key financier of Kenya, has called on the government to seal gaps in the legal framework of anti-money laundering.

The fund last month said it will engage the government to ensure a proposal to relax the checks on large cash transactions by financial institutions does not increase the risk of money laundering.

The Cabinet while approving the anti-money laundering Bill last month agreed to a proposal that increases the cash disclosure threshold by 50 percent from the current $10,000 (Sh1.4 million) to $15,000 (Sh2.1 million).

MPs, many of whom are also lawyers, voted to amend the law to shield lawyers, notaries and other legal professionals from revealing confidential information about their clients’ transactions.

The MPs also approved changes to the Proceeds of Crime and Anti-Money Laundering Act to designate the Law Society of Kenya (LSK) as the self-regulating body for reporting of dirty cash by legal professionals.

Lawyers have battled designating advocates as reporting agents for suspicious transactions arguing the profession was bound by client-attorney privileges that seek to protect confidential information received from clients.

“Lawyers, notaries and other independent legal professionals are not required to report suspicious transactions if the relevant information was obtained in circumstances where they are subject to professional secrecy or legal privilege,” the Justice and Legal Affairs Committee chaired by Ainabkoi MP Samuel Chepkonga, said.

The committee shielded the lawyers from reporting information received from a client in the course of ascertaining the legal position of the client.

The lawyers and notaries will not report information received or obtained in performing their tasks of defending or representing the client in or concerning judicial, administrative, arbitration or mediation proceedings.

“The act of a lawyer, notary and other independent legal professional seeking to dissuade a client from engaging in an illegal activity does not constitute the offence of tipping-off,” says an amendment to the law.

The LSK and the Financial Reporting Centre (FRC) will be required to establish appropriate mechanisms to cooperate for the exchange of information relating to suspicious transaction reporting and supervision.

The LSK will also wield power to impose monetary, civil or administrative sanctions for violations relating to anti-money laundering.

The proposed changes will, however, come into effect six months from the commencement of the Bill and lawyers will start disclosing suspicious financial deals involving their clients.

Read: Respect privacy in the money laundering war

The changes contained in the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023 sailed through Third Reading on Wednesday. The Bill now awaits President William Ruto’s signature to become law.

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