The Anti-Money Laundering Act 2009 takes effect starting Monday, June 28, 2010.
The Proceeds of Crime and Anti-Money Laundering Act and Arbitration (amendment) Act provides mechanisms for detecting and seizing proceeds of money laundering.
On New Year’s eve, President Mwai Kibaki signed into law a Bill aimed at curbing the vice and introduce measures to identify, trace, freeze and seize proceeds of crime.
The International Monetary Fund puts the aggregate size of money laundering in the world between $725 billion (Sh56.5 trillion) and $1.8 trillion (Sh140.4 trillion).
Money laundering is a process in which the origin of funds generated by illegal means such as drug trafficking, gun smuggling, terrorism and corruption is concealed.
The fraud is effected by passing the proceedings secretly through legitimate business channels by means of bank deposits, investments, or transfers from one place (or person) to another.
In the new regulation now, any person who knows or ought to have reasonably known or suspected that any property is part of the proceeds of crime but conceals or disguises the nature or source of the same commits an offence.
It also provides for the establishment, powers and functions of the Financial Reporting Centre.
Those found guilty of the offence of money laundering will serve a jail term not exceeding seven years, or a fine not exceeding Sh2.5 million, or both.
KCB Group chief executive and chairman of the Kenya Bankers Association Martin Oduor-Otieno, says the global threat of money laundering has been a big issue because many criminals have been using banks as an avenue of cleaning the proceeds of crime.
That is why central banks and governments have been looking for ways of stemming the crimes by coming up with the legislation including Kenya said Mr Oduor-Otieno.
He says with the enactment of the Act, the government has a framework through which it can monitor, report and manage money laundering.
Mr Oduor-Otieno says some Kenyan banks have come up with initiatives such as know your customer, which were aimed at enabling banks to avoid taking into custody money of questionable nature.
However, there was no basis to withhold the funds or take somebody to court.
A budget review document prepared by PriceWaterHouseCoopers says under the Act, financial institutions and professionals such as accountants risk high punitive fines if they breach several provisions of the Act.
Stock brokers and insurance industry players are likely to be the most affected by these requirements as the current anti-money laundering practices in these sectors are weak.
Directors and employees of reporting institutions may also be personally liable under the Act.