VZCZCXYZ0007
OO RUEHWEB

DE RUEHNR #0259/01 0191129
ZNR UUUUU ZZH
O 191129Z JAN 06
FM AMEMBASSY NAIROBI
TO RUEAWJA/DEPT OF JUSTICE WASHDC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RUEHC/SECSTATE WASHDC IMMEDIATE 9049
INFO RUEHXR/RWANDA COLLECTIVE PRIORITY

UNCLAS NAIROBI 000259 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EB/ESC/TFS 
USAID FOR AFR/EA 
JUSTICE FOR OIA AND AFMLS 
TREASURY FOR FINCEN 
 
E.O. 12958: N/A 
TAGS: EFIN KCRM KTFN PTER SNAR KE
SUBJECT: KENYA SUBMISSION FOR INSCR PART II, MONEY 
LAUNDERING AND FINANCIAL CRIMES 
 
REF: 05 STATE 210324 
 
SENSITIVE BUT UNCLASSIFIED.  FOR USG USE ONLY. 
 
¶1. Per Ref A request, below is post's submission for Part II 
of the INSCR Report on Money Laundering and Financial Crimes. 
Unfortunately, there has been very little change in the 
conditions, laws, or policies surrounding money laundering 
and financial crimes (and many other issues) since last 
year's submission.  Therefore, the text below is a lightly 
edited version of last year's published report on Kenya.  A 
red-lined version has also been e-mailed to 
rindlerep@state.gov and Kenya Desk Officer Susie Pratt. 
 
¶2. Begin Text 
 
As a regional financial and trade center for East, Central, 
and Southern Africa, Kenya's economy has a large informal 
sector and a thriving network of cash-based, unrecorded 
transfers, primarily used by expatriates to send and receive 
remittances internationally. As such, Kenya is vulnerable to 
money laundering. Recently Kenya has taken steps to trace 
millions of dollars of public funds that were laundered 
abroad; corruption facilitated the removal of the money. 
 
Section 49 of the Narcotic Drugs and Psychotropic Substance 
Control Act of 1994 criminalizes money laundering related to 
narcotics trafficking. Narcotics-related money laundering is 
punishable by a maximum prison sentence of 14 years, though 
up to now no clear instances of laundering of funds from 
narcotics trafficking appear to have come to light.  The 
Central Bank is the regulatory and supervisory authority for 
Kenya's deposit taking institutions and has responsibility 
for 46 financial institutions and 93 forex bureaus.  The 
Kenyan 
Parliament passed legislation at the end of 2004 
strengthening 
the Central Bank's supervisory authority, but without 
specific 
reference to money laundering. 
 
In October 2000, the Central Bank issued regulations that 
require deposit institutions to verify the identity of 
customers wishing to open an account or conduct a 
transaction. The regulations also stipulate that these 
institutions report suspicious transactions. Under the 
regulations, banks must maintain records of large 
transactions and report them to the Central Bank. These 
regulations do not cover nonbank financial institutions such 
as money remitters, casinos, or investment companies, and 
there is no enforcement mechanism behind the regulations. 
Some banks do file suspicious transaction reports 
voluntarily, but they run the risk of civil litigation as 
there are no adequate "safe harbor" provisions for reporting 
such transactions to the Central Bank. The trigger amount is 
also very high: on a daily basis, all commercial banks are 
required to submit reports detailing all transactions greater 
than $100,000. Controls on money laundering as such are 
rarely if ever applied to financial institutions or 
intermediaries outside the banking sector. 
 
Kenya has little in the way of cross-boundary currency 
controls. Kenyan regulations require that any amount of cash 
above $5,000 be disclosed at the point of entry or departure. 
In reality this provision is rarely enforced. Central Bank 
guidelines call for currency exchange firms to furnish 
reports on a daily basis on any single foreign exchange 
transaction above about $10,000, and on cumulative daily 
foreign exchange inflows and outflows of about $100,000. 
Under September 2002 guidelines, foreign exchange dealers are 
required to ensure that cross-border payments are not 
connected with illegal financial transactions. 
 
The Banking Act amendment of December 2001 authorizes 
disclosure of financial information by the Central Bank of 
Kenya to any monetary authority or financial regulatory 
authority within or outside Kenya. In 2002, the Kenya Bankers 
Association issued guidelines requiring banks to report 
suspicious transactions to the Central Bank. These guidelines 
do not have the force of law and only a handful of suspicious 
transactions have ever been reported. 
 
Kenya is a party to the 1999 UN International Convention for 
Suppression of the Financing of Terrorism. It has cooperated 
fully with the United States and the UK, but does not itself 
 
have the investigative skills, institutional capacity, or 
equipment to conduct complex investigations independently. In 
April 2003, the GOK introduced the Suppression of Terrorism 
Bill into Parliament. The bill contains provisions that will 
strengthen the GOK's ability to combat terrorism, but the 
legislation is opposed by many for fear of human rights 
violations, not because of the bill's antiterrorism aspects 
as such. The public does support the government's attempts to 
increase transparency and to clean up corruption, which 
include its efforts related to money laundering. 
There is no legislation permitting the seizure of the 
financial assets of terrorists. All charitable and nonprofit 
organizations are registered with the Government and have to 
submit annual reports. Noncompliance could lead to 
de-registration; however, this is rarely enforced. The 
government did de-register some NGOs with Islamic links in 
1998 in the wake of the bombing of the U.S. Embassy in 
Nairobi, although they were later re-registered. 
 
Kenya is a party to the 1988 UN Drug Convention. Kenya is an 
active member of the Eastern and Southern African Anti-Money 
Laundering Group (ESAAMLG), a FATF-style regional body. Kenya 
has an informal agreement with the U.S. for the exchange of 
information regarding narcotics, terrorism financing, and 
other serious crime investigations. 
 
At present the government entities responsible for tracing 
and seizing assets include the Central Bank of Kenya Banking 
Fraud Investigation Unit, the Kenya Police through the 
Anti-Narcotics Unit and the Anti-Terrorism Police Unit, and 
the Kenya Revenue Authority. 
 
The passage of anti-money laundering legislation and the 
creation of a financial intelligence unit by Kenya will help 
to formalize its relationship with the U.S. and with other 
countries. In 2001, the Government of Kenya formed the 
Anti-Money Laundering Task Force with the mandate of drafting 
a comprehensive anti-money laundering law, sensitizing the 
public and government to money laundering issues, and 
addressing terrorist financing. The Task Force meets 
regularly 
to discuss AML issues. 
 
After the inception of the task force, a bill on money 
laundering was drafted, and submitted to the Attorney General 
for final revision, but the November 21 Constitutional 
referendum 
delayed action  As of November 2005, the Attorney General had 
identified 21 other statutes that would need to be amended to 
be consistent with the AML bill.  The Task Force has 
clarified 
issues raised by the Attorney General, and is waiting for the 
AG 
to finalize the bill and send it to the Cabinet for approval 
and 
transmission to Parliament.  Although President Kibaki 
announced 
on December 7 his replacements for the Cabinet, controversy 
over 
the appointments continued.  The difficulties of forming a 
new 
Cabinet, plus the President,s decision to prorogue 
Parliament 
will further delay action on the bill. 
 
The key points of the draft legislation include tracing, 
seizing and 
freezing suspect accounts, including those involved in the 
financing 
of terrorism; confiscation of the proceeds of crime, 
declaration of the source of funds; outlawing of anonymous 
bank accounts; and introduction of mandatory reporting of 
suspicious transactions above a certain amount. Some of the 
provisions regarding the financing of terrorism may be 
subsumed in 
the Suppression of Terrorism Bill discussed above. The 
proposed 
legislation is not explicit on seizing legitimate business if 
used 
to launder money. The draft legislation provides for criminal 
forfeiture 
only. Actual seizure of assets and forfeiture under current 
law is rare. 
 
Once a new Cabinet is finalized and Parliament returns, Kenya 
 
should 
expedite the passage of its comprehensive anti-money 
laundering 
legislation and Suppression of Terrorism Bill legislation. 
End text 
BELLAMY