Banks face steep fines in terror financing war

 

Commercial banks and officials face steep fines for facilitating terrorism financiers as Kenya fights to lift itself from a global 'grey list' after its safeguards against the flow of dirty cash were found wanting.

New regulations published by the Interior and Administration of National Government ministry say any person found guilty of unauthorised release of frozen funds or assets linked to terror suspects flagged by the United Nations would be jailed for up to 20 years.

Legal entities —either reporting institutions such as banks or law enforcement agencies —that will release such frozen assets without authorisation would be slapped with a fine of Sh20 million.

“No person within Kenya shall make available any funds or other assets to or for the benefit of designated persons or entities unless licensed, authorised or otherwise notified in accordance with the relevant United Nations Security Council Resolutions.”

"This is according to sub-regulation (1) of Prevention of Terrorism (Implementation of The United Nations Security Council Resolutions on Prevention, Suppression, and Disruption of Proliferation Financing) Regulations, 2023,” Interior and Administration of National Government Cabinet Secretary Kithure Kindiki says in the new regulations.

The United Nations Counter Financing of Terrorism Inter-Ministerial Committee shall be responsible for the implementation of targeted financial sanctions relating to the prevention, suppression, and prevention of proliferation financing.

The Secretary of the Committee shall monitor the sanctions lists of people designated as terrorists daily and circulate them to reporting institutions, supervisory bodies, national security organs, and law enforcement agencies.

The regulations are part of the government’s efforts to have Kenya removed from the grey list.

Kenya in February joined 23 other countries in a list of shame known as the ‘grey list' for weak safeguards on flow of dirty cash. The grey list refers to countries that have deficiencies in dealing with money laundering and terrorist financing.

The verdict by FATF came from an assessment in 2022 that found that Kenya had little understanding of terrorism financing, with authorities often confusing it with terrorism.

“Kenya conducts TF (Terrorism Financing) investigations alongside terrorism-related investigations. However, there are limited case studies and statistics to demonstrate that a range of TF activity is pursued and that TF is prosecuted as a distinct criminal activity. Kenya has not demonstrated a broader range of investigations into different terrorist groups operating in Kenya or in neighbouring countries,” reads part of the Mutual Evaluation Report by the Eastern and Southern Africa Anti-Money Laundering Group, an affiliate of FATF.

With the new regulations, all the reporting institutions and law enforcement agencies are expected to freeze all funds or other assets that are owned or controlled by the designated person or entity.

“And not just those that can be tied to a particular act, plot or threat of proliferation,” reads the regulations.

Also to be frozen include the funds or other assets derived or generated from funds or other assets owned or controlled directly or indirectly by designated persons or entities.

The funds or assets of persons and entities acting on behalf of, or at the direction of designated persons or entities, should also be frozen.

Two Kenyans were among the 16 entities and individuals sanctioned by the US Department of the Treasury’s Office of Foreign Assets Control for laundering funds raised by Al-Shabaab, a Kenyan business in the United Arab Emirates, a terrorist group affiliated with al-Qaeda.

FATF prescribed a number of actions based on the deficiencies and gave Kenya 12 months to address them. The country exited the observation period in October last year and filed a post-observation report in November. The body is convinced that there are remaining strategic gaps that Kenya needs to address.

Grey list

The listing means that Kenya is now under increased scrutiny by the FATF. Other countries in the grey list are Tanzania, South Sudan, Nigeria, South Africa, Mali, Mozambique and Burkina Faso. Others are Senegal and Cameroon.

“Black and grey lists show the level of diligence when it comes to combating these illicit financial transactions,” Riva Jibali, a tax and human rights adviser at Amnesty International told the Business Daily in an earlier interview.

To get off the list, Kenya will also be required to adopt a legal framework for the licensing and supervision of virtual asset service providers such as cryptocurrency dealers.

It will also have to designate an authority for the regulation of trusts and collection of accurate and up-to-date beneficial ownership information and implementing remedial actions for breaches of compliance with transparency requirements for legal persons and arrangements.

Kenya will also have to increase money laundering and terrorist financing investigations and prosecutions in line with risks, among other things if it is to exit the list of the countries under increased scrutiny.

By DOMINIC OMONDI