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"id": 194637,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/194637/?format=api",
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"type": "speech",
"speaker_name": "Mr. Kimunya",
"speaker_title": "The Minister for Finance",
"speaker": {
"id": 174,
"legal_name": "Amos Muhinga Kimunya",
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"content": " Mr. Speaker, Sir, I beg to move that The Proceeds of Crime and Anti-Money Laundering Bill be now read a Second Time. Mr. Speaker, Sir, as hon. Members are aware, this Bill was committed to the Departmental Committee on Finance, Planning and Trade which has just started meeting. To be fair to the House and the Committee, I would like to ask that we proceed with the discussion. However, before the Committee Stage, I do undertake to have the relevant discussions and sessions with the relevant Committee and ensure that we have a report here. This is a weighty Bill which requires input from all of us. I would like to ask that we do not even rush it. It is a landmark Bill. Hopefully, we would then be able to bring it to the Third Reading. Mr. Speaker, Sir, as hon. Members may be aware, money laundering is the process through which criminals disguise the origin of and legitimise their ill-gotten benefits of crime. The goal of a large number of criminal acts is to generate a profit for the individual or a group that carries out that act, often at the public expense. To criminals, money laundering is, therefore, of critical importance as it enables them then to enjoy the profit derived from criminal activities without jeopardizing or even revealing their actual sources. Mr. Speaker, Sir, money laundering is commonly referred to as cleaning of money; a perception that gives the vice a metaphorical connotation, implying that money acquired unlawfully can be cleaned to appear as genuine. As the practice is illegal, it is transacted with a lot of secrecy and, hence, it mainly operates in the underground economy. Although it may be seen as an independent crime, it has annexes with other criminal activities that it feeds from. Mr. Speaker, Sir, traditionally, money laundering was associated with disguising money acquired from the proceeds of drug trafficking. But this is increasingly being viewed as limited, since money acquired dubiously can also be laundered. It is, therefore, prudent not to link money laundering to a particular crime, but to acknowledge that as long as there is evidence of an attempt to de-link money acquired illegally from the crime from which it was earned and, subsequently, integrate the money into the economy as genuine money, then money laundering has occurred. Mr. Speaker, Sir, money laundering is a complex undertaking. It occurs in three broad stages. The first stage is the placement, which is the initial stage when the funds enter the economy. The second stage is typically referred to as the layering, where complex networks of transactions are created to attempt to obscure the link between the initial entry point and the end of the cycle. The third stage of money laundering is integration, where the money returns to the legitimate economy. So, money launderers go through these stages because they need to prevent the discovery of the crime that they have committed, which may lead to prosecution, conviction and confiscation of their criminal funds. Mr. Speaker, Sir, some commentators ask questions as to why a country, especially a developing country, should really be worried about money laundering as long as through this process a nation can attract substantial resources to finance its development programmes. To appreciate why we need to be worried about money laundering, one needs also to appreciate the 940 PARLIAMENTARY DEBATES May 8, 2008 kind of criminal activities which generate the money that requires to be cleaned. As I said before, the money itself is not dirty. It becomes dirty when it is associated with its source. It does not really matter how much it is cleaned; so long as somebody was murdered, that money will carry the blood of that person. So long as the activities, include illegal arms sales that result in innocent people dying for the wrong reasons, that money will always carry the blood of those people. So long as that is involving smuggling, drug trafficking or even prostitution rings, which generate huge sums of money, that money will always carry the tag of the crime that generated that money. It is important then to look at whether a country can develop on \"blood\" and criminal money. It is also important to look at whether criminals who bring that money to a country that prides itself and thinks that they have now got new money, cannot also take away from the same country where they have purported to bring that money. So, it is a double-edged sword. I think that argument has been proved through hot money going through economies, destabilizing the economic frameworks and then getting out when the systems are such that they cannot clean up that money. Mr. Speaker, Sir, other activities that generate this money that requires laundering, include embezzlement, insider trading, bribery and computer fraud schemes, including such schemes as our pyramid schemes that generated quite a lot of excitement in this House recently. They have left many Kenyans feeling very vulnerable because the people who took away that money may have enjoyed it and the poor fellows who it was taken away from have all suffered. Mr. Speaker, Sir, all these illegal schemes eventually end up creating incentives to legitimise the ill-gotten gains through money laundering. When a criminal activity generates substantial profit, the individual or group involved must find a way to control the funds without attracting attention to the underlying activity of the person involved. Criminals do this by disguising the source, changing the form or even moving the funds to a place where they are comfortable that they are not likely to attract attention. Mr. Speaker, Sir, I believe earlier on there were some certain islands within this world where people thought that money would actually be safe. But as the global actions and economies start converging in terms of controlling the vice, I do not believe that there is any single entity that is now left, where people can say they have actually hidden their money. Where the people would actually think they have hidden the money, the recipients of the money would be the first ones to actually tell on, because they know that if you remove it, you pay a huge commission. So, really, the world is getting smaller. There is no place to hide and the traditional havens are fast disappearing. Mr. Speaker, Sir, we consider money laundering as a cousin of corruption. Money laundering of necessity breeds corruption, which in turn becomes the manure for further money laundering. We all know the dangers of corruption. We, as a nation and House, have committed to get rid of corruption and turn this country into a country where zero tolerance to corruption is the order of the day. I am very encouraged when you look at the manifestos of all the political parties, and even within a harmonized framework. I believe the issue of corruption is highlighted with a commitment that all the parties are committed to fighting corruption for the better of the Kenyan people. Mr. Speaker, Sir, money laundering and corruption undermine a country's business reputation and stands in the way of investments. It also fuels organised crime which, in turn, fuels money laundering. It is a cycle. Money laundering, similarly, undermines the soundness and integrity of the country's financial system by making it prey to hot money. The economic and political influence of criminals can weaken the social fabric of the society, the collective ethical standards and, ultimately, the democratic institutions of the society. So, Mr. Speaker, Sir, even as we argue, as I have seen in some written articles, that poor May 8, 2008 PARLIAMENTARY DEBATES 941 countries should encourage money, irrespective of where it comes from, we must be awake to the fact that, that hot money, by the time it leaves, leaves with the money that it found in the economy. We all need to just remember in this country in the early 1990s, between 1991 and 1993. We all know of the infamous Goldenberg scam. We know what happened. The exchange rate to the dollar used to be very stable, at Kshs17 to the dollar. It shot up to Kshs80 to the dollar. Interest rates, at some point, were in excess of 100 per cent to mop up the excess money that was generated through that scam. The economy has never recovered from the full effects of just what happened within those two years. So, Mr. Speaker, Sir, despite the fact that this has happened to us, it could happen again. The earlier we get prepared in terms of how we can control any infusion of an injection of money that is not conducive to what we believe in, and what we want to do as a country, money that could come in and mess up our economy, the better for us. Mr. Speaker, Sir, on a global basis, in response to the mounting concern over money laundering, the Group of Seven (G7) Summit in Paris established a Financial Action Taskforce on Money Laundering, which used to be called the FATF, just about 20 years ago in 1989. Their task was to develop a co-ordinated international response. One of the first tasks for the Taskforce was to develop some 40 recommendations in all and some nine special recommendations that were developed later, which set out the measures that national governments should take to implement effective anti-money laundering programmes. If I look a the 40 recommendations that were drafted in 1989 and published in April, 1990, they were subsequently reviewed in 1996 and as recently as 2003. Mr. Speaker, Sir, just by way of giving a background, I want to share a few of these highlights with the hon. Members. The 40 recommendations basically fall into three categories. One is on the legal systems. The other set of recommendations relate to the financial institutions and other designated non-financial businesses and corporations. The third category refers to institutional and other necessary measures to combat money laundering and terrorist financing. Mr. Speaker, Sir, again, just looking at the highlights of these recommendations, recommendations number one to three - and I will be happy to provide a copy of these recommendations to hon. members - basically address the legal system of nations, calling upon countries to, first of all, criminalize money laundering on the basis of the United Nations (UN) Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. Mr. Speaker, Sir, as you are aware, this House has passed a law outlawing anti-narcotics and all psychotropic substances, which has helped us to bring down the drugs menace. Also, the other point of reference is the 1998 Vienna Convention and the UN Convention Against Transnational Organized Crime, which is referred to as the Palermo Convention. Mr. Speaker, Sir, the second recommendation basically talks of implementing a series of provisional measures aimed at tracing, freezing, seizing, confiscating property and the instrumentality of the youth in the commission of money laundering offences. Mr. Speaker, Sir, the second set of recommendations, which is basically another 22 of them, between number four to number 25, address the measures to be taken to combat money laundering by financial institutions and designated non-financial business and professions. These measures include the prohibition of secret, anonymous or fictitious accounts, the routine and enhanced customer due diligence procedures on both the account holders and persons who seek to conduct business or transactions. Of particular note to these recommendations in extremely wide breadth and reach of the application. Mr. Speaker, Sir, our own Central Bank has been applying these recommendations within the framework of guidelines. You are all aware of the \"Know your customer guidelines\", where we seek to know who is actually opening this account, what are they doing and, basically, putting a 942 PARLIAMENTARY DEBATES May 8, 2008 face to the operation of the account. Mr. Speaker, Sir, the next set of recommendations, that is number 26 to 34, address the institutional and other measures that are aimed at such issues as domestic co-operations, the collection, analysis and dissemination of financial intelligence, the adequacy of the law enforcement powers and resources, the compilation of the comprehensive statistics and also the transparency of legal persons and legal arrangements. Mr. Speaker, Sir, the last set of the recommendations, which is, again, a set of six recommendations, relates to international co-operation including extraditions, the mutual legal assistance, co-ordination and recommendation of foreign asset confiscation action, sharing in the proceeds of confiscated assets and the widest range of international co-operation. Mr. Speaker, Sir, like I said, in addition to the 40 recommendations, there was another nine specific recommendations which relate to the measures to combat financing of terrorism. As you know, one of the crimes that generate all these things or which monies are moved around is, perhaps, then to disguise it so that it can be used to finance terrorism and terrorist activities. These nine specific recommendations call upon countries to implement the range of measures aimed at combating terrorist financing. I just want to highlight this because, as you know, Kenya has been hit a couple of times through terrorist activities, where we have had innocent Kenyans dying for no fault of their own. We need to look at them and see how we can save ourselves from that in the future within a legal framework, without, at the same time, being seen to be targeting specific groups or communities. Mr. Speaker, Sir, the first special recommendation calls upon states to immediately satisfy and implement the various UN instruments on terrorist financing. The second recommendation calls upon states to criminalize the financing of terrorism and money laundering associated with it. Recommendation number three calls upon states to adopt and implement measures, including legislation to permit the freezing and confiscation of terrorists' assets. Recommendation number four again calls upon states to require financial institutions to report suspicions of existence of terrorist-related funds to competent authorities. The fifth recommendation calls upon states to engage in the greatest possible range of international co-operation in relation to combating terrorist financing, including the denial of safe havens for suspected terrorist financiers. The sixth recommendation calls upon states to license or register all alternative remittance dealers and their agents and to subject transgressors to sanctions. The seventh recommendation calls upon states to ensure enhanced customer due diligence on wire transfers recognising the advancement in technology. The eighth recommendation calls upon states to review the laws that relate to non-profit organisations some of which have been used as a cover-up to move around money that ends up in activities that are not exactly conducive to the activities of those organisations. The ninth recommendation calls upon states to detect the cross-border transportation of cash and negotiable instruments and to impose sanctions on persons who transgress laws requiring declaration or disclosure of such movement. Mr. Speaker, Sir, the Government of Kenya is committed to fighting the vice of money laundering and towards this end has joined the regional and international bodies committed to fighting the vice and its predicate offences. Kenya is a signatory to a number of the UN conventions. It has signed and ratified all the UN conventions, the AU as well as the COMESA protocols meant to combat money laundering. The only missing thing is that we have not had a law to domesticate our international wishes, regional issues and whatever we have done within our trading blocks. There are also protocols on corruption and financing of terrorism. By signing and committing to implement these conventions, basically, Kenya has joined the global partnership to combat corruption, money laundering and terrorist financing. Similarly, May 8, 2008 PARLIAMENTARY DEBATES 943 Kenya is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which is also committed to implementing the 40 plus nine anti-money laundering and terrorism recommendations. The ESAAMLG comprises of 14 member countries, namely, Botswana, Kenya, Tanzania, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Seychelles, Uganda, Zambia and Zimbabwe. Indeed, we hosted a couple of their meetings and we may be hosting another one in the very near future to discuss the progress of all the 14 countries with regard to the issues of combating anti-money laundering. Mr. Speaker, Sir, money launderers are continuously looking for new roads to launder their funds. Economies with growing or developing financial centres but inadequate controls are particularly vulnerable, as they establish financial centres and as countries, implement comprehensive anti-money laundering regimes. Some might argue that developing economies cannot afford to be selective. However, like I said earlier, money laundering not only damages the integrity of the individual institution, but it also has severe effects on the direct foreign investments when a country's commercial and financial sectors are perceived to be under the control and influence of organised criminals. In fact, I believe you will all remember that early last year, when there were statements to the effect that the Nairobi Stock Exchange (NSE) was being funded through drugs or money laundering, there was a whole dip in the performance. There was concern all over the country whether people should come and invest in Kenya or whether their money should mix with ours. At least, the situation was corrected quickly and the wrong impression that had been created was addressed. We saw business pick up again. So, perceptions are very important within the financial markets. If people believe that a country has no way of sifting the good and the bad, they would not want their money to be associated with the bad money. Hence, we could jeopardise our ability to tap in to quality foreign direct investments. Mr. Speaker, Sir, aware of the damages that corruption and money laundering have caused our economy and society, we have basically committed ourselves to fight corruption in all its manifestations. Hon. Members are aware of both the legal and institutional reform measures we have taken in this regard. Indeed, the Proceeds of Crime and Anti-Money Laundering Bill is intended to further the agenda to improve the governance framework of our country. We started this journey in 2003 with the Economic Crimes Act, the Kenya Anti-Corruption Commission Act, the Public Officer Ethics Act and a series of other legislation, including the Financial Management Act and the revision of the Audit Act. All these things have helped us to bring in the stability and predictability that is required, and to enhance management of the economy. We have all seen the result of that. So, this is one of the laws that will be coming in to help us move forward. The Bill is straightforward. It is intended to provide strong legal and institutional framework generally, and particularly, money laundering in all its facets, including the provision of a civil forfeiture regime. As you all know, there is already a civil forfeiture regime within the Economic Crimes Act. So, really, we are not talking about anything new here. We are basically defining a subset of the economic crimes within money laundering, hence, the same procedure will apply. It is nothing new because it is already there only that now it is more specific. Mr. Speaker, Sir, under the Bill, predicate crimes of money laundering apply to all the underlying unlawful activities, both within and outside Kenya. This will not only cover the criminal offences, but other activities that contravene Kenyan law. The Bill contains measures to freeze and confiscate the instrumentalities of crime. This is done through confiscation and civil forfeiture, provisions for property tracking orders, search and seizure powers. In addition, the Bill provides for preventive measures for financial institutions as well as designated non-financial businesses and professions. It also establishes the legal framework for the financial reporting centre and creates an asset recovery agency that will be responsible for implementing the confiscation and 944 PARLIAMENTARY DEBATES May 8, 2008 forfeiture of proceeds of crime. Provision is also made for international assistance in investigations and proceedings that relate to money laundering and other related crimes. Mr. Speaker, Sir, allow me to re-emphasise that the Bill has definitional clauses highlighting those acts that will be construed as money laundering and property that will be seen as having been acquired through criminal activities. So, we will not be left with any doubt as to what exactly amounts to money laundering or what amounts to property that was linked to that money laundering. The Bill also creates those agencies that I mentioned that will implement the objects of the Bill. They are basically three of them; the Financial Reporting Centre, the Anti-Money Laundering Advisory Committee and the Asset Recovery Agency. The agency shall administer the Criminal Assets Recovery Fund that is also created within the Bill. The Bill obliges reporting institutions to report suspected criminals and money laundering activities to the centres. It also highlights the procedures for recovering and preserving the proceeds of crime and money laundering. There is also a section that shall inform Kenyan efforts in seeking mutual legal assistance from foreign countries when dealing with the vices. Mr. Speaker, Sir, I would like to quickly run through some of the provisions stated in the Bill. The first one is actually the definition of clauses within Part 2. That is captured within Clauses 3 to 9 of the Bill. The activities that shall constitute money laundering and other related activities are defined within this part. Again, for the benefit of the House and those hon. Members who may not have the time to read through this Bill, such activities shall include assisting criminals to hide properties acquired unlawfully as well as assisting others benefit from the proceeds of crime. It shall be a crime to acquire or to be in possession of proceeds of crime. This is something which is already captured, I believe, in the Penal Code; handling of stolen property or illegal property. So, it is here just for emphasis. Anyone who fails to report any suspicion regarding proceeds of crime will have committed an offence. To knowingly transport, transmit, transfer or receive a monetary instrument with the intention of committing an offence will also be illegal. Tipping off those who are likely to be subjects to a money laundering investigations, or giving false information to officials or bodies regulating the Act shall also be an offence. It shall also be an offence to transmit more money than prescribed in the Act, without reporting as, indeed, shall be the failure to comply with a court of order relating to any of the matters herein. There are also penalties associated with each of these offences. The proposal seeks to override secrecy obligations as set out by other laws in Kenya. However, those who exercise the duties set out in the Bill in good faith shall be immune from prosecution. Parts III, IV, V and IX, basically create the implementing agencies. As I said, this Bill proposes the establishment the Financial Recovery Centre (FRC), the Anti-Money Laundering Advisory Committee (AMLAC), the Assets Recovery Agency (ARA) and the Criminal Assets Recovery Fund (CARF). These bodies shall be the vehicles that will implement the objects of the Bill and shall complement each other's functions. The main objects of the FRC shall be to assist in identification of the proceeds of crime and combating money laundering. It shall also have the power to inspect the reporting institutions. Information from the reporting institutions and supervisory bodies shall be received by the FRC and disseminated to investigating authorities and other bodies. Again, this is just a better way of co-ordinating all these things, so that we have one person who has the specialist expertise in terms of knowing what to look for and to whom to pass it on, so that things can move in a more efficient way. The AMLAC shall basically advise the Director of the FRC on how to perform his or her duties. Again, the ARA shall be the body responsible for recovery of any proceeds of crime and laundered money covered within the Act. It shall be a semi-autonomous body under the May 8, 2008 PARLIAMENTARY DEBATES 945 stewardship of the Attorney-General (AG). The ARA shall also administer the monies of the CARF to be established under Part XI. The anti-money laundering obligations of a reporting institutions are covered under Part IV. This part provides for a number of obligations that are imposed on reporting institutions to ensure that any activities that appear suspicious and are likely to be related to money laundering are reported to the FRC. Again, these institutions are financial, business as well as professional organisations. In order to ensure that they perform the task, they shall be required to verify customer identity, maintain customer records, establish and maintain the internal reporting procedures. This is exactly what is happening now. It is a standard practice; it is good governance. All we are saying is that it is now being captured within a legal framework, so that it becomes mandatory, for instance, for anyone going to a bank to provide all the information that the bank requires for it to know who the customer is. Similarly, anyone dealing with any of the other institutions shall be required to know them. The procedure of recovering and preserving proceeds of crime and laundered money is covered under Parts VII, IIX, IX and X. These parts set out the criminal as well as the civil procedures to be followed in the recovery of money acquired unlawfully or laundered money. This mechanism shall include confiscation orders, restraint orders, bankruptcy procedure and winding up of companies whose proceeds have to be realised. Part IX lays down the general provisions relating to the preservation and forfeiture orders, whereas Part X empowers the police to acquire information and documents from persons who may be suspected to have committed any offences under this Bill. It shall be an offence if any person required to give this information to the police or to any other enforcement authority fails to comply with a police order. Part XII deals with the issue of international assistance in tackling money laundering. Under this Part, the AG shall have the power to seek help from foreign governments when investigating crime and money laundering. The AG shall also be required to assist foreign governments seeking similar information from Kenya. In arriving at this Bill, the National Task Force on Money Laundering and Combating Financing of Terrorism (NTFMLCFT) which was formed in the year 2003 by the then Minister for Finance to come up with a comprehensive draft legislation on anti-money laundering, involved several stakeholders, including Members of the Departmental Committee on Finance, Planning and Trade and the Departmental Committee on Administration of Justice and Legal Affairs. They held several workshops in 2004, 2005 and 2007 to understand and appreciate the provisions of the Bill, provide feedback, and all the issues that had to be fine-tuned. It is important to point out that, basically, the Proceeds of Crime and Anti-Money Laundering Bill was first published in October, 2006. It was tabled in Parliament in November, 2006. However, the Bill lapsed in 2006. The Bill was subsequently re-published in April, 2007, but, again, it lapsed when the Ninth Parliament was prorogued in October, 2007. So, this is the third time it has come to this House. It is my hope that after its first publishing in 2006, its re- publishing in 2007 and its further re-publishing now, hon. Members will have adequate time to look at its provisions, so that we can have whatever amendments may be necessary to make it work to remove any fears from our society in terms of potential for any misuse of the resultant Act. If a law will be misused, then it cannot be of use to the country. We will then have a detailed discussion and come up with a Bill which will help to stabilise our financial markets and bring us at par with the rest of the world, which is moving in this direction, and at the same time, protect the law from potential misuse. So, I hope that this time round, we will actually go through it. We have the time. With the enthusiasm we have seen in this 946 PARLIAMENTARY DEBATES May 8, 2008 House towards clearing any pending Bills, this Bill will be disposed of. As I said, because of the importance of this Bill, I want to give justice to it by allowing the Departmental Committee to go through it with a fine tooth comb, come up with a report, we discuss and agree on what we need to pass as a House. Let me assure hon. Members that this Bill, generally, meets the global standards and best practices. It is comprehensive in its scope and coverage with regard to institutions required to comply with the provisions contained herein. In view of the problems that money laundering poses to an economy and the society, as I have enumerated, I would like to ask that the debate should not be whether or not Kenya should establish an anti-money laundering regime, but rather the quality of the legislative regime. I know that similar sentiments might arise when we discuss issues like whether Kenya should pass an anti-drugs law and an economic crimes law, and whether, we, as a country, should allow certain activities that other countries have allowed within their territories, such as operation of prostitution rings. The issue here is whether, we, as a country, should not be proud that we will operate on quality money and quality investments that can be sustained in the long-term. I wish to request hon. Members to support this Bill, so that we can achieve our shared vision of building a nation that is free of money laundering, corruption and other associated vices. I know I have taken quite a bit of time moving this Bill. It was important to go through the issues, so that hon. Members can appreciate where we are coming from. I ask that we get into the real depth of this Bill. We should let all the fears come out on the Floor of this House, so that we can come out and say: \"Together, we have done it!\" Mr. Speaker, Sir, with those many words, I beg to move and ask the Minister for Special Programmes, Dr. Shaban, to second the Bill."
}