Anti-Money Laundering: Enhanced Customer Due Diligence

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Anti-Money Laundering: Enhanced Customer Due Diligence

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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 contact: Noella Lubano

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