Regulatory Alerts2023-11-06
Central Bank of Kenya Circular No. 13 of 2023 - Highlights of the AML CFT (Amendment) Act 2023
Dear [Financial Institution Representative], We trust that you have received our previous correspondence regarding the amendments to the Prevention of Organized Crime Act, 2009 (POCAMLA) as passed by the Kenyan Parliament and assented to by the President. As you are aware, these amendments include significant changes to the Anti-Money Laundering/Countering Financing of Terrorism (AML/CFT) regime in Kenya, including the extension of AML/CFT obligations to lawyers and their incorporation as reporting entities under POCAMLA. We would like to share with you our interpretation of these amendments and provide guidance on how they may affect your organization. As always, we encourage you to consult your legal advisors for any specific inquiries or concerns that arise from this communication. 1. Lawyers as Reporting Entities: Under the newly-enacted POCAMLA, lawyers are now considered reporting entities for AML/CFT purposes. This means they must comply with all the same obligations as other financial institutions, including conducting customer due diligence, maintaining records of transactions, and submitting suspicious transaction reports (STRs) to the Financial Reporting Centre (FRC). Lawyers are now subject to the supervision of the Law Society of Kenya (LSK), which has been designated by POCAMLA as a self-regulatory body for this purpose. The LSK will monitor lawyers' compliance with AML/CFT obligations and submit STRs through the FRC. It is important for your organization to understand that any transaction carried out on behalf of clients by lawyers may be subject to the same level of scrutiny as transactions conducted directly by financial institutions. To ensure compliance, you should establish mechanisms for continuous monitoring of transactions involving lawyers and their clients. 2. Inclusion of Law Society of Kenya (LSK): The LSK has been designated by POCAMLA as a self-regulatory body for the purposes of AML/CFT supervision. This means that it is responsible for overseeing lawyers' compliance with AML/CFT obligations, including the submission of STRs to the FRC. The inclusion of LSK in this regulatory framework marks a significant development in the Kenyan financial system, as it establishes a clear and consistent approach to the supervision of lawyers for AML/CFT purposes. Your organization should work closely with the LSK to ensure that STRs submitted by lawyers are accurately and promptly transmitted to the FRC. 3. Countering Financing of Terrorism (CFT) and Countering Proliferation Financing (CPF): POCAMLA has been amended to include explicit provisions for CFT and CPF, in addition to AML. This means that all preventive measures established under POCAML Regulations, 2013 also apply to CFT and CPF. While AML/CFT/CPF share some common elements, it is important to note the distinct objectives of each regime. For example, while CTF aims to prevent the financing of terrorist activities, CPF seeks to prevent the financing of proliferation-related activities. Your organization should ensure that its AML/CFT policies and procedures adequately reflect these differences and are not treated as a single, unified regime. 4. Submission of STRs: Under the revised POCAMLA, reporting institutions are now required to submit STRs to the FRC within two days after suspicion has arisen. This represents an important change from the previous deadline of 15 days, and underscores the need for prompt action in cases of suspected 4. Submission of STRs: Under the revised POCAMLA, reporting institutions are now required to submit STRs to the FRC within two (2)) days after suspicion has arisen. This represents a significant change from the previous deadline of 15 (15) days. Your organization should ensure that it has in place mechanisms for prompt action in cases of suspected As always, we encourage you to consult with your legal counsel regarding these amendments and their implications for your organization. We also recommend that you regularly update yourself on any additional guidance or clarifications issued by the relevant authorities or regulatory bodies. We remain at your disposal for any further assistance or clarification that may be needed in this regard. Yours faithfully, GERAL A. NYAOMA DIRECTOR, BANK SUPERVISION Cc: Mr. Mohamed Nur Ali Chief Executive Officer Kenya Forex and Remittance Association Pioneer Building Kimathi Street, 7th Floor, Room 3 P.O Box 106217-001 NAIROBI Mr. Saitoti Maika Director General Financial Reporting Centre UAP-Old Mutual Towers NAIROBI