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Proceeds Of Crime And Anti-Money Laundering Act

This Act Of Parliament Was Assented To On 31st December 2009 And Came Into Force On 28th June 2010 And Deals With The Offence Of Money Laundering. Money Laundering Is The offence Committed When A Person Who Knows Or Ought To Know That Property Is Or Forms Part Of Benefits Of Crime Enters Into An Agreement Or Arrangement Whether Legally Enforceable Or Not Aimed At Covering The Nature, Source, Location And Ownership Of The Property Or At Removing Or Diminishing The Said Property Or At Helping Someone Who Commits This Offence Avoid Prosecution.

Money Laundering Includes Holding, Using, Acquiring, Transferring Or Any Arrangement Involving Proceeds Of Crime Where The Person Dealing With The Property Knew Or Had All Available Channels To Acquire The Knowledge That The Property Was Acquired Through The Commission Of A Crime.  

The Act Sets Out The Offence Of Money Laundering And  introduces Measures For Combating The Offence, To Provide For The Identification, Tracing, Freezing, Seizure And Confiscation Of The Proceeds Of Crime.

Part 3 of the Act establishes the Financial Reporting Centre which is a state corporation with a common seal and the ability to sue and be sued in its own name. It shall be and is headquartered in Nairobi

 The objectives of the Centre are:

  • To prevent and fight money laundering,
  • To prevent the funding of terrorism and
  • To help identify the proceeds of crime.

The Act empowers the Centre

  1. To collect and analyze information on usual or suspicious transaction reports made by reporting institutions,
  2. To send information received pursuant to the Act to the correct law enforcement agency, to cause the inspection of any reporting institution during the ordinary working hours.
  3. To request for additional information from the reporting institutions,
  4. To make recommendations to the country and spread information based on the reports made by the reporting institutions, train the reporting institutions, and
  5. To provide information on the commission of a money or financial related offence to foreign financial intelligence.

The Centre is to be led by Director and a Deputy Director whose appointment is provided for by section 25 of the Act. The Anti-Money Laundering Board shall recommend positions.

Section 25(4) provides the qualifications to be met by a person to be appointed to these two positions. The qualified persons shall be approved by the national assembly and appointed by the minister to the respective hold office for a term of four years and three years respectively and these terms can be renewed only once.

Section 26 provides for the resignation of the director and the deputy director through a written letter to the minister.

Section 27 provides for their removal from office on the grounds which include proof of financial conflict of interest with a reporting institution, bankruptcy or the commission of an Act of bankruptcy, and the commission of an offence punishable by imprisonment for more than six months.

 Section 28 provides for the responsibilities of the director and these include control and maintenance of the staff,and the general management and effective administration of the Centre.

Section 31 provides that the Centre shall hire other officers and staff necessary for the performance of its functions.

 Section 32 provides that the Director, The Deputy Director and all the staff members of the Centre shall take an oath of secrecy at the start of their employment before a magistrate and this secrecy should continue even after they stop working for the Centre.

Section 33 facilitates the exercise of the Centre’s power to inspect the reporting institutions which are expected to produce their books of accounts, letters, and any other document for the inspection. These documents can be removed from their offices and copies can be made for the use of the Centre.

 Section 34 provides that the director of the Centre can give any reporting institution which is being inspected the opportunity to be heard and can issue notices requiring the institutions to comply with orders made under section 33.

Section 35 states that the director can by notice direct any former employee of a reporting institution which is being inspected to provide help to the inspector, give books of accounts or even appear before the inspector for questioning. It is an offence for such officer to fail to follow the notice once issued and the former employee shall be liable to imprisonment for a period not exceeding 3 years or a fine of not more than one million shillings or both.

Section 36 gives the duties of supervisory bodies in connection to the Centre. The Supervisory bodies are:

  • Central bank of Kenya,
  • Insurance Regulatory Authority,
  • Betting and Licensing Control Board,
  • Capital Markets Authority,
  • Institute of Certified Public Accountants of Kenya,
  • Estate Agents Registration Board,
  • Non-Governmental Organizations Co-ordination Board,
  • Retirement Benefits Authority.

The section states that these bodies shall report to the Centre any suspicious transactions they encounter during their normal operations. It is an offence for an officer of these bodies to fail to make report of such suspicious transactions and is punishable by a prison term not exceeding three years or a fine of not more than one million shilling or both for a natural person and a fine not exceeding five million shillings for body corporates.     

Section 36A gives the Centre the powers to supervise all reporting institutions. The section further states that the supervisory bodies identified above have the duty to ensure the Act is followed.

Section 37 allows the Centre or any other law enforcement urgency to obtain a search warrant with for any reporting institution and enforce that search warrant according to the directions of the court and the needs of the Centre in searching the offices, removing documents and material or any other thing for the use of the Centre.

Section 38 allows the Centre to apply for tracking and monitoring orders with connection to any property forming the subject matter of any investigation.

 Section 39 states that the Centre can obtain orders from the high court against officers of a reporting institution that fails to follow with the provisions of the act.

Section 40 to 43 deal with the finances of the Centre and state that the money to be used by the Centre shall consist of, money allocated by the parliament, grants from the government and any other money acquired according to the law and with the permission of the minister.

The financial year of the Centre is expected to end on 31st June and the Centre is to prepare estimates of expenses approximately three months before the start of the next financial year. These estimates shall be approved by the Board and the minister in charge and these estimates are not to be changed without the minister’s consent. The Centre is further expected to keep proper books of accounts and records and these books shall be audited in accordance with the Public Audit Act (Cap. 412B).       

Part 4 of the Act deals with the duties of the reporting institutions. Reporting institutions are basically financial institutions and designated non-financial institutions and businesses and include, banks insurance companies, capital markets intermediaries among others.

 The institutions are expected to monitor transactions as directed by regulations and pay attention to any unusual transactions and the pattern of these transactions which have no obvious economic or lawful purpose. The institutions are expected to report such suspicious transactions which may amount to money laundering or look like proceeds of crime to the Centre.

The reports should talk of not finished transactions but also transactions which did not happen too but were started.  The reports are to be made in the prescribed form and within seven days of the transaction being reported. The institutions are expected to investigate these transactions and make their findings in writing. These reports are to be submitted to the Centre together with copies of all documents directly relevant to the suspicion and the grounds for the same. The Centre may require and officer of the institution making the report to provide further particulars or to provide more documents.

Section 45 provides that every reporting institution should verify the identity of its customer and perform customer due diligence on its existing customers. The institutions are expected to find out the true identity of the principal behind any agent wishing to transact with it. For corporations the institutions are expected to satisfy themselves on the incorporation of the body and the authority of the specific person to transact on behalf of the corporate.

Section 46 expects the reporting institutions to maintain customer records.. This duty expects the institutions to maintain records that contain sufficient particulars capable of identifying the name, physical and postal address and the occupation of the person conducting the transaction, time and the nature of the transaction, the amount involved and the identifying number for the account involved in the transaction. 

Section 47 obligates these institutions to establish internal reporting procedures which discloses the proper reporting channel for employees and consequently forms the information flow channels to the employees.

Section 47A expects all the reporting institutions to register with the Centre and provides for the particulars to be submitted for such registration.  

Part 5 of the Act establishes the Anti-Money Laundering Board. The board shall consist of

  • the Chairperson,
  • the Permanent Secretary in the Ministry for finance,
  • the Attorney-General,
  • the Governor of Central Bank of Kenya
  • the Commissioner of Police,
  • the Chairman of the Kenya Bankers’ Association,
  • the Chief Executive Officer, of the Institute of Certified Public Accountants of Kenya,
  • two other persons appointed by the Minister from the private sector who shall have knowledge and expertise in matters relating to money laundering  
  • the Director of the Centre, who shall be the secretary.

Section 50 provides for the functions of the Board

Section 51 provides for the procedure to be followed in the conduct of the Board’s business.

 

Section 53 of the Act establishes the Agency as a partly independent body under the office of the attorney general. The agency director shall be appointed by the attorney general. The person to be appointed shall be a degree holder in law, economics, or finance and have at least 7 years of experience.  

The function of the agency is to implement part 7 to 12 of the Act - Civil and Criminal Forfeiture, Assets Recovery and International Assistance for the recovery or forfeiture.

This is provided for in Part 11 of the Act. The fund shall consist of the money and property realized on the satisfaction of forfeiture and confiscation orders, money allocated by the parliament, grants and  money or property recovered under the Anti-Corruption and Economic Crimes Act, 2003 (Cap. 65), or under any other Act other than money or property recovered on behalf of any public body or person. The fund is to be administered by the agency and will be used as directed by the Minister of Finance.

Section 56 provides that the procedures to be used in the application for restraint and confiscation order are to be civil and the rules on producing evidence shall be the same as is used in civil proceedings.

Section 57 gives a list of the realizable property. This includes

  • laundered property,
  • proceeds from or meant to be used in money laundering or committing offences
  • property used for or intended for use in funding an offence
  • property held by the concerned defendant,
  • property held by someone to whom the defendant has gifted directly or indirectly.

Property in regards to which a forfeiture order exists shall not be realized.

Section 58 provides for the valuation of property to be realized.

Section 59 defines what amounts to a gift that should be forfeited for realization.

Section 60 provides that proceeding against a defendant are concluded once they are acquitted, found not guilty, the defendant is convicted without a confiscation order having been made or the confiscation order is satisfied.

Section 61 provides for confiscation orders which shall be issued once the defendant is convicted and the Attorney General or the Agency Director applies for it or on the court’s own motion. The effect of the confiscation order is to make the convicted defendant pay to the government any amount it considers fair and further orders can be made to ensure the effectiveness and fairness of this order. The amount ordered should however not be more than the benefits of the crime and the court can at this stage look into the benefits the defendant got from the offence or any other criminal activity for which the defendant is being tried for. The inquiry is held first if it will not delay the sentencing or the Attorney General can apply for the defendant to be sentenced first and the court is satisfied that this is reasonable.

 Section 62 provides for the methods to be used in valuing the defendant’s proceeds of crime

Section 63 provides for the amount which must be realized to satisfy a confiscation order should be equal to the value of the realizable property held by the defendant and any gifts made by the defendant.

Section 64 provides that the agency director shall present to court an affidavit by the defendant or any other person concerned with the proceedings relating to the determination of the value of the benefits the defendant acquired from the crime in issue. The defendant shall be served with the affidavit and can dispute the contents stating the grounds for his dispute. If the defendant does not dispute the affidavit it shall be considered conclusive proof of the matters contained therein. 

Section 65 provides the procedure to be used in collecting evidence about the proceeds of crime acquired by the defendant. If at the time of the inquiry it is found that the defendant does not possess legitimate sources of income to explain the interest in the property he holds, this shall be taken as evidence that the interest forms part of the proceeds of a crime.

If the defendant fails to provide a confirmation of information in the affidavit as provided for in section 64 or provides false information on the court’s request it shall be taken to be evidence that the property concerned forms part of the defendant’s benefits from a crime. The section goes further to provide for a determination of the time at which the defendant received the proceeds of the crime and to provide issues of expenditures for the proceeds

Section 66 provides that the effect of the confiscation order is similar to that of a civil judgment.

Section 67 provides for the procedure to be followed if the defendant misses court or dies. The court orders for inquiry into the benefits the defendant might have made from the crime he is being charged with. If the person dies before the confiscation order is made then on application of the agency director the court can go ahead to inquire into the benefits that the deceased made from the crime if convinced that a confiscation order would have been issued against the defendant before his death. 

Section 68 deals with restraint orders which are one party orders to be issued by court on such terms as the order may prescribe in respect of realizable property. The section provides conditions to be fulfilled before the court issues the order and states that the order may be issued alongside an order for the disclosure or discovery of facts or an order as to the seizure of movable property. The order should specify the notice period to be granted to the person it is directed to before it is enforced.  

Section 69 provides for the instance when restraint orders can be made.

Section 70 provides that once issued the order should stay in force pending any appeal of the decision concerned.

Section 71 provides for the seizure of property subject to a restraint order and provides that this can be done by a police officer to prevent the disposal of the property.

 Section 72 provides that a manager shall be appointed with respect to the property subject to the .

Section 73 deals with immovable properties and the orders that can be made pursuant thereto. It provides that once a restraint order has been issued towards immovable property the court can further order the registrar of lands to place a restriction on the land register with respect to the immovable property. Any person affected by this order can apply for a rescission order and the issuing court can either rescind the order at any time or after the payment of the amount secured by the restraint order and may direct the registrar of land to remove the restriction placed pursuant to that order.

Section 74 provides that an appeal against an application to vary or rescind a restraint order shall Act as a stay to such variation or rescission.

Section 75 provides for the procedure for the realization of property to be followed once a confiscation order has been made and no appeal lies against the order. The court in this instance shall appoint a receiver for the property to be realized if none has been appointed yet and the receiver or the manager shall be allowed to realize the property concerned in a manner that the court deems fit. The court will further order any person in possession of any realizable property to surrender it to the receiver or the manager.

 However realization will not take place before all persons with an interest in the property are allowed to make presentations to the court about the realization of the property.  Such persons include the victims of the crime committed by the defendant and any person directly affected by the confiscation order. Realization of the property will be suspended if the court is satisfied that the victim of the crime committed by the defendant or any other person who has suffered loss or damage due to the actions of the defendant has obtained a judgment against the defendant or has instituted or is in the process of instituting civil proceeding against the defendant for a period of time to allow the satisfaction of the claim or judgment and the related legal expenses. It is after the satisfaction of the claim or the expiry of the period allowed by the court that the receiver will go ahead with the realization of the property whichever is earliest.

Section 76 provides for the application of the proceeds of the realization and states that the receiver shall apply such money towards the satisfaction of the confiscation order and this will be after such payments as the court will direct have been made. If any money remains after the satisfaction of the confiscation order, it will be paid to persons who held the realized property in such proportions as the court will determine after the persons have made representations to the court.

 Section 77 provides for the exercise of the powers of the court and the receiver and states that these powers should be used to make available the current value of the realizable property for the satisfaction of the confiscation order.

Section 78 provides for the variation of confiscation orders where the realizable property is inadequate to cover the confiscation order.

Section 79 talks about the effect of bankruptcy on realizable property and states that the realizable property or any proceeds of such property realized shall not form part of the bankrupt’s property that vests in the official receiver, the trustee, or the registrar of the high court. If the defendant who is adjudicated bankrupt gifts any part of the realizable property to another person, that gift will not be set aside if the gift forms part of the property under a restraint order or where proceedings have been instituted against the defendant but have not been concluded yet.

 Section 80 talks about the effect of a winding up order on realizable property and is to the effect that the realizable property will not form part of the corporates property available for the satisfaction of creditors. 

Part 8 of the Act deals with civil forfeiture and starts with the recovery and preservation of property. All proceedings under this part of the Act shall be civil proceedings.

Section 82 provides for preservation orders which will have the effect of prohibiting the receiver from dealing with property believed to be proceeds of crime or likely to be used in the commission of an offence. The order will be obtained through an ex parte application made by the agency director and will be given under such conditions as the court directs. This order, like a restraint order may be accompanied by an order for the seizure of the property concerned by a police officer.

Section 83 directs the agency director upon a preservation order being made to issue a notice to all persons interested in the property within twenty one days and publish the notice in the Kenya gazette. Service of the notice shall be in accordance with the civil procedure act. Any person interested in the property may give notice of their intention to oppose the forfeiture of the property or to apply for an order excluding their interest from the property. 

Section 84 provides that a preservation order shall only stay in force for ninety days unless a forfeiture order is made with regards to this property or the preservation order is rescinded before expiry of the period.

 Section85 provides in detail for the seizure of property forming subject of a preservation order and states that such property shall be dealt with according to the directions of the court ordering the seizure.

Section 86 provides for the appointment of a manager with regards to this property who is to assume control of the property and administer and where the property is a business to carry on the business with due regard to the law applicable. Where the property forming the subject matter of the preservation order is immovable property, the registrar of lands will be directed to register a restrictions alongside the property and such restriction will have the effect of preventing any encumbrance being registered against the property, transfer of the property and the vesting of such property in the official receiver or trustee without the consent of the court.

Section 88 provides that a preservation order can provide for reasonable living expenses on any person with an interest in the property.

Variation and rescission of a preservation order is provided for in section 89 of the Act which states that the court can allow for rescission if satisfied that order will prevent the holder of the property from earning a living or that the hardship to be suffered by the applicant outweighs any risk that the preservation order aims to prevent.

Section 90 deals with the application for forfeiture orders. The agency director can apply for forfeiture of property forming the subject of a preservation order to the government. The director should issue a notice of the application to all persons interested in the property and these persons [

 The failure to comply with a production order is dealt with in section 105 which makes the contravention of the order to be an offence punishable by not more than 7 years imprisonment or a fine of not less than two millions shillings or both for a natural person and a fine of not more than ten million shilling for a body corporate.

The police officers are given powers in section 106 to search and seize documents that would help in the location of property while

Section 107 provides for the issuing of warrants to facilitate the search and seizure.

 Section 108 makes it an offence for a police officer to person a search and seizure without a warrant and on conviction the officer will be liable to imprisonment for a term not exceeding 5 years or a fine not exceeding one million shillings or both. 

 Part 12 of the Act deals with international assistance in investigations, with

section 114 recognizing the principle of mutuality and reciprocity.

Section 115 allows the attorney general to request assistance from foreign agencies in the investigation and extradition of persons from the foreign country to Kenya with section 116 providing that information received from the foreign agencies shall not be used for other reasons outside what was stated in the request.

 Section 117 deals with transfers of persons to Kenya to help with investigations while

Section 118 deals with requests sent to Kenya for evidence from foreign countries.

Section 119 provides for requests to Kenya for issuance of search warrants and seizures and states that the attorney general shall apply for the warrants to the high court which shall issue the warrants on satisfaction that proceedings or investigations relating to a serious crime have commenced in the requesting country and that there are reasonable grounds to believe that the evidence requested in located in Kenya. Section 120 provides for the enforcement of certain foreign orders in Kenya. In such cases the attorney general is to apply to the high court for the registration of the order and once registered the order shall have the effect and will be enforced as if it was issued in Kenya.

The miscellaneous provisions are contained in part 13 of the act. Section 121 states that the attorney general can request for information from an officer or employee of the government or a statutory agency and that such person will not be prohibited by any provision of law from providing the requested information.

Section 122 gives authority to the attorney general to institute investigations against any person believed to be in possession of information concerning the commission of a crime under the act.

Section 123 provides for the sharing of information between the enforcers of the Act and the Commissioner General of the Kenya Revenue Authority or any official designated by that person for this purpose. 

Section 124 provides that all hearings to be conducted under the Act shall be in open court except the ex parte hearings.

 Section 125 provides for monitoring orders against reporting institutions which shall be applied for ex parte and with the effect of directing the institution to provide information to the applying officer. Section 126 directs the reporting institutions not to disclose the existence of the monitoring order to any person except officers and agents of the institutions, their legal advisors and the police force on written authorization.

 Section 128 makes electronic evidence admissible in the prosecutions under the Act while

section 129 makes statements of dead persons or persons that cannot be traced admissible despite the provisions of the Evidence Act.

 Section 131 makes the provisions of the Act superior to any other legal provisions in contradiction to it.

Section 134 allows the minister in charge of finance to make regulations necessary for the expedient achievement of the objectives of the act. It is pursuant to this provision that several guidelines and regulations have been issued to guide the implementation of the act.

 

The Act limits the amount that one can convey in a monetary instrument without involving the persons authorized by the Act and further makes it an offence, in section 12 for one to fail to disclose monetary instruments that exceed the set limit or makes a misrepresentation of the amount to be conveyed whether in Kenya or abroad. The section further allows the authorized officer to seize an instrument he suspects to be in violation of the Act for not less than five days to allow a court order to be issued and the officer shall issue a receipt to the owner of the monetary instrument specifying the agency, name and rank of the officer, date and time of the seizure, a description of the seized instrument, and a notice of his intention to initiate forfeiture proceedings. The authorized officer is further expected to obtain information from the owner of the instrument about its source, and intended use and record the same in writing together with the details of the owner and the amount to be conveyed in the instrument in the prescribed form.

The second schedule of the Act limits the maximum amount that can be conveyed through a monetary instrument to US dollars 10,000 or its Kenyan equivalent. An instrument conveying money beyond this limit falls under the procedure set down in section 12.   

Section 17 limits the applicability of secrecy obligations or restrictions prescribed by any other law and states that the obligation to disclose information provided for by the Act overrides all these other restrictions. It further states that no liability shall attach to disclosure of information whether against the restrictions of any statute or common law when done in compliance with the act. However section 18 protects the client advocate relationship and states that any information provided within this relationship still remains to be privileged information.

Section 19 grants immunity to reporting institutions, government entities and their employees and agents who Act in accordance with the Act and in good faith from prosecution. Section 20 protects information and informers and provides that the identity of informers should be kept confidential. However there is an exception to this confidentiality when the court is of the opinion that justice will not be done without the disclosure of the informant and when the informer is needed to be a witness for the Centre.

The Act in schedule two lists the reporting institutions to help in the implementation of the act. The regulatory authorities in charge of these institutions have issued guidelines to help the reporting institution in the implementation of the act.

The Central Bank of Kenya in 2012 issued the guidelines on the prevention of money laundering titled Guideline on Proceeds of Crime and Money Laundering (Prevention) applicable to all institutions licensed under the banking Act of Kenya. The guidelines define money laundering and the proceeds of crime similarly to the Act and goes ahead to identify the stages in money laundering. The guidelines state that despite the various methods that are used in money laundering they all encompass three major steps. These steps are comprised of several transactions that can be carried out by launders and can be identified by the institutions registered under the banking Act in Kenya. The steps are placement which refers to the physical disposal of the original proceeds from crime, layering which refers to the several tractions carried out to separate the property from the crime and integration which refers to the provision of legitimacy to criminally acquired property.

The guidelines identify their purpose as to provide guidance regarding the prevention, detection and the control of possible money laundering activities and terrorism financing and place an obligation on the board of directors of all banking institutions to adequately train their staff on the identification of customers the source of their funds and the intended application of the funds. The boards of directors are further obligated to ensure the acquisition of identification information from customers, maintenance of adequate records on transactions for a minimum of seven years to help in the identification of suspicious transactions, regular training of staff in money laundering identification, and reporting to the central bank of Kenya any suspicious transitions. The central banks of Kenya through these guidelines prohibit the maintenance of anonymous accounts with any bank registered in Kenya.

The guidelines give circumstances when customer identification must be done by banking institutions especially in case of suspicious transactions and where there is doubt on the adequacy of the customer identification information previously obtained.  The guidelines give the customer verification procedure and state that the type of information required will depend on the business institution and the type of the customer. The verification procedure is meant to ensure that the institution actually satisfies itself on the actual existence of the customer and the nature of the business the customer is expected to conduct with the institution. The procedures cover different kind of transaction including face to face verification for minor accounts, for accounts or transactions involving corporates, partnerships and sole traders, for unincorporated business, and For the Trustees of Occupational Pension Schemes. It gives guidelines on non-face to face verifications for postal and telephone banking, and for internet and cyber banking. The guidelines provide the type of information to be required in the verification of the legitimacy of funds and transactions. The importance of reporting suspicious transactions to central bank of Kenya is emphasized,  and further state that any information on suspicious transactions should be confidential and only disclosed to the central bank of Kenya. The guidelines provide the forms to be used in reporting suspicious transactions to the central bank of Kenya and list some of the transactions that can be considered as suspicious.

The Capital Markets Authority gazetted in March 2016 its guidelines on the Prevention of Money Laundering and Terrorism Financing in the Capital Markets. These guidelines are designed to create an oversight mechanism to detect and prevent money laundering and terrorism financing. The guidelines require all companies registered with the capital markets authority to establish policies and procedures for prevention and detention of money laundering transactions. The guidelines talk about customer identification and require the market intermediaries to use a high risk approach while vetting their customers and to take steps in mitigating these risks. Customer identification is identified as crucial in minimizing the high risk of this industry being used in money laundering and procedures for ensuring proper vetting and acquisition of adequate evidence of the customer identity are reinforced in the guidelines.  Due diligence is expected for the intermediaries both for new and ongoing business transactions. Record keeping for at least seven years of all transactions that the intermediaries take part in especially the suspicious ones is emphasized. The guidelines emphasize more due diligence for transactions conducted in a non-face to face manner on the reliance of technology. 

The Insurance Regulatory Authority in 2011 issued the guidelines to the insurance industry on the implementation of the proceeds of crime and anti-money laundering act. These guidelines were also issued pursuant to section 3A of the insurance Act of Kenya and are aimed at helping insurance companies combat crimes related to money laundering. The guidelines admit the possibility of the insurance sector being used in money laundering and define money laundering in the same terms as those used in the act. The guideline identifies some of the vulnerabilities in the insurance sector that can be exploited by money launders to include life policies, unit-linked or non-unit-linked single premium contracts; purchased annuities, lump sum top-ups to an existing life contract, and lump sum contributions to personal pension’s contracts. General insurance claims have also been identified as capable of being exploited by money launders in terms of inflated and bogus claims. The establishment of fake reinsurance companies is also another way that money laundering can find place in the insurance sector.

The guidelines identify the three stages of money laundering to be placement layering and integration. They further identify policies and procedures to be used in the sector to combat money laundering. The boards of directors for insurance institutions are expected to set up policies for the training of their staff to ensure adequate identification and verification of customers. The policies and procedures should be registered with the insurance regulatory authority. The policies and procedures are further to be communicated to the management. The institutions are to further develop manuals setting out the procedures for customer acceptance, due diligence, record keeping, recognition and reporting of suspicious transactions, and for staff screening. The customer acceptance policies developed by the institutions should be aimed at identifying types of customers and beneficiaries who pose a higher risk of money laundering and these policies and procedures are to be relied on before the institution decides to commence a business relationship with any customer. The guidelines give factors to be considered in assessing the risk profile of a potential client and these include the nature of the insurance premium sought and it susceptibility to money laundering, origin of the customer and the beneficiaries, the nature of the business conducted by the customer, the complex ownership structure in case of corporate clients and the means and type of payment for the premiums.

The guidelines emphasize on customer due diligence which is to be conducted before and after entering into business relations with the customers. Due diligence implies that no anonymous accounts will be held by the insurance institutions or accounts in obvious fictitious names. Measures to be followed to ensure adequate due diligence are provided by the guidelines. These measures differ between natural customers and corporate customers. There are expectations that partnerships with unidentified partners are to satisfy with the guidelines requiring the institutions to obtain satisfactory evidence on the identity of at least two partners. Due diligence is emphasized further especially with regards to the high risk customers. The institutions are also directed to conduct on going due diligence on existing customers and transactions that require due diligence after the creation of a business relationship are identified to include change of beneficiaries to include non-family members, significant increase in amount or sum insured or of premiums paid, use of cash or large payments of premiums at once, payments using banking instruments allowing anonymity, and lump sum top ups on life insurance or pension contracts among others. Non face to face transactions require effective customer identification procedures to be set up. The guidelines also deal with record keeping for insurance companies and the records are to be kept for seven years. The guidelines further require the insurance institutions to develop mechanisms for the detection and reporting of suspicious transactions and identify certain aspects that these mechanisms should take into consideration.  

In conclusion it is important to note that the guidelines in the three sectors, that is in banking, insurance and the capital markets emphasize on some common factors. These are due diligence for both new customers and existing ones, proper customer identification before any transaction, laying down of procedures to help in the flagging of suspicious transactions, proper record keeping of all transaction especially those flagged as suspicious for a minimum  of seven year and the reporting of any suspicious transaction carried out in the three sectors. These are the key ways that the regulators in the different sectors have found to be crucial in preventing money laundering in the sectors. These aspects will help the institutions in the different sectors avoid the misuse of the sectors to fund illegal activities or even to hide and clean up dirty money.   

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