Lawyers agree with State to tell on clients dealing in dirty money

Lawyers whose clients handle dirty money will now be obligated to report them to the government. This is according to a deal signed between a lawyers’ association and the Financial Reporting Centre (FRC).

FRC officials told MPs the agency has agreed with the Law Society of Kenya (LSK) to withdraw a case blocking the implementation of the Proceeds of Crime and Anti-Money Laundering (Amendment) Act that compels lawyers and their staff to disclose suspicious financial deals involving their clients.

The National Assembly approved the amendment in 2019, but LSK sued through Nairobi-based lawyer Omwanza Ombati, arguing that the changes would be detrimental to practising advocates.

“We have reached an agreement with LSK that it shall [regulate itself] and that lawyers will report on [deals involving dirty cash],” FRC Director-General Saitoti ole Maika said.

“The lawyers had raised an issue with the requirement that they report on their clients. They said this goes against client advocate confidentiality but we have agreed in principle that the LSK will be the regulator,” he added.

Mr Ole Maika was addressing the National Assembly’s Finance and National Planning Committee, which is taking views from the public on the Anti-Money Laundering and Combating of Terrorism Financing (Amendment) Bill, 2023.

Section 2(c) and section 14 (b) of the Proceeds of Crime and Anti-Money Laundering Act, designates lawyers and their employees—including accountants, clerks and cleaners—as reporting agents for the FRC.

The Act also names notaries and other independent legal professionals as reporting entities for dirty cash dealings.

The Proceeds of Crime and Anti-Money Laundering (Amendment) Bill, 2023 seeks to amend section 36 of the principal Act to ensure that the LSK regulates, supervises and enforces compliance to anti-money laundering (AML), combating the financing of terrorism (CFT), and countering proliferation financing (CPF) regulations for lawyers, notaries and other legal professionals.

The amendments give the LSK power to conduct on-site inspections, compel the production of any document or information it may require in order to carry out its supervisory mandate and impose monetary, civil or administrative sanctions for violations. It will also be required to share information with other agencies.

The Central Bank of Kenya (CBK) has backed the proposed changes, arguing that the country stands the risk of being placed in the Financial Action Task Force (FATF) “grey list” if it does not substantially address deficiencies, including legal reforms, by October.

“This will result in a negative impact on international trade, negative impact on international transactions and termination of banking relationships with international banks due to high AML/CFT/CPF compliance costs,” CBK Governor Kamau Thugge said.