Focus Special Edition – Corruption in Africa – Part 3 of 4: Kenya

In this special edition of Focus, we continue with our special look at anti-corruption legislation in Africa in the context of foreign investment.  In this third part of a series of four articles, we take a closer look at bribery legislation in Kenya with the assistance of Walker Kontos Advocates in Nairobi. In the weeks to follow, we will look at South Africa.


Anti-Corruption and Anti-Money Laundering Legislation in Kenya

Kenya has passed into legislation a number of statues that deal with corruption, economic crimes and money laundering.  At the same time, an attempt is being made to make the running of Government and State Corporations more transparent with the enactment of the PPDA and POEA: 

  1. The Anti-Corruption and Economic Crimes Act (No. 3 of 2003) (commenced 2nd May, 2003) ("the ACECA").
  2. The Public Officer Ethics Act, No. 4 of 2003 (commenced 2nd May, 2003) ("the POEA").
  3. The Public Procurement and Disposal Act, No. 3 of 2005 (commenced 1st January, 2007) ("thePPDA").
  4. Proceeds of Crime and Anti-Money Laundering Act, No.9 of 2009 (commenced 28th June, 2009) ("the AML").

ACECA
The ACECA provides substantive definitions for corruption and economic crimes in sections 2, 39 to 44, 46 and 47. The ACECA caters for the appointment of Special Magistrates who have the jurisdiction to try corruption and economic crimes and related offences; and any conspiracy to commit or any attempt to commit or any abatement of any of the offences related to corruption and economic crimes.

KACC and Board

The ACECA also established the Kenya Anti-Corruption Commission (the "KACC") and the Kenya Anti-Corruption Advisory Board (the "Board"). The Board is made up of persons nominated by stakeholders.  It is unincorporated and is tasked with advising the KACC in matters relating to the exercise of its powers and discharge of its functions. The KACC’s functions are set out in section 7 of the ACECA and largely comprise of investigative powers and making recommendation for cases to be prosecuted. However, the auspices of actually prosecuting such cases falls under the Attorney-General.

Part IV of the ACECA provides the tools for investigations that the KACC can rely on. Under the said part IV the Director (who is the head of the KACC) can by notice in writing request a statement of a person’s property if that person is suspected of corruption or an economic crime. The Director may also request similar information from an "associate of a suspected person", or request for the production of records and property (note that this last request is provided for under section 28 of the ACECA and has been substantially watered down after a 2007 amendment). Failure to provide information to any of the above requests could upon conviction lead to a fine not exceeding Kenya Shillings three hundred thousand (approx. £2,000), or to imprisonment for a term not exceeding three years or both. The KACC also has the power to search premises, compel the surrender of travel documents and be able to arrest persons "to the like extent as police officers".  

Offences

The Offences under the ACECA are numerous and are listed under Part V which starts by defining an "agent" (a person who, in any capacity, and whether in the public or private sector, is employed by or acts for or on behalf of another person) and "principal" (a person, whether in the public or private sector, who employs an agent or for whom or on whose behalf an agent acts). Section 38 goes on to state that "for the purposes of this Part – (a) a Cabinet Minister shall be deemed to be an agent for both the Cabinet and the Government; and (b) the holder of a prescribed office or position shall be deemed to be an agent for the prescribed principal." Offences under this part include: Bribery of agents; secret inducement for advice; deceiving the principal; conflicts of interest; improper benefits to trustees for appointments; bid rigging; abuse of office and dealing with suspect property. For ease of reference section 48 has been reproduced in its entirety as it prescribes the penalties under part V.

"48.(1) A person convicted of an offence under this Part shall be liable to ­

(a)        a fine not exceeding one million shillings, or to imprisonment for a term not exceeding ten years, or to both; and

(b)        an additional mandatory fine if, as a result of the conduct that constituted the offence, the person received a quantifiable benefit or any other person suffered a quantifiable loss.

(2)        The mandatory fine referred to in subsection (1)(b) shall be determined as follows ­

(a)        the mandatory fine shall be equal to two times the amount of the benefit or loss described in subsection (1)(b);

(b)        if the conduct that constituted the offence resulted in both a benefit and loss described in subsection (1)(b), the mandatory fine shall be equal to two times the sum of the amount of the benefit and the amount of the loss.

The ACECA does not provide for any compliance or governance standards that a corporate entity may adopt, nonetheless as highlighted above it provides for the offences and corresponding penalties in relation to corruption and economic crimes.   

AML

The AML, inter alia, makes it a crime for someone who knows or ought to have known that property is or forms part of the proceeds of crime and enters into any agreement or engages in any arrangement or transaction with anyone in connection with that property. Further, any attempt to conceal or disguise the nature, source, location, disposition or movement of such property or enable or assist any person who committed or commits an offence, whether in Kenya or overseas to avoid prosecution or remove or diminish any property acquired directly or indirectly as a result of the commission of an offence is also considered a crime.

Implementation

The institutions charged with implementing the AML are the Financial Reporting Centre ("the FRC") which is a body with investigative powers and by analogy can be compared to Kenya Anti-Corruption Commission, the Anti-Money Laundering Advisory Board which shall advise the Director of the FRC and lastly the Assets Recovery Agency ("the Agency") which by its title is self explanatory and is considered a semi-autonomous body under the auspices of the Attorney-General.

The procedures for recovering and preserving the proceeds of crime are set out in parts VII and VIII of the Act. The mechanisms set out include confiscation orders, bankruptcy procedures and winding up of companies whose proceeds have to be realized. Part IX lays down the general provisions relating to preservation and forfeiture orders. Part X empowers the police to acquire the information and documents from any persons who may be suspected to have committed any offences under the Act. In addition, the Attorney General has the power under this part to seek help from foreign governments when investigating crime and money laundering and like-wise to assist foreign governments seeking similar information from Kenya.

Reporting Institutions

The AML provides for the obligations of a Reporting Institution defined in section 2 "to mean a financial institution and designated non-financial business and profession" with the following responsibilities provided in section 44 to 47:

A reporting institution shall monitor on an ongoing basis all complex, unusual, suspicious, large or other transaction as may be specified in the regulations, whether completed or not, and shall pay attention to all unusual patterns of transactions, to insignificant but periodic patterns of transactions that have no apparent economic or lawful purpose as stipulated in the regulations;

A reporting institution shall take reasonable measures to satisfy itself as to the true identity of any applicant seeking to enter into a business relationship with it or to carry out a transaction or series of transactions with it, by requiring the applicant to produce an official record reasonably capable of establishing the true identity of the applicant; the applicant in this case can be an individual, the government, or a body corporate. Further, a reporting institution shall undertake customer due diligence on the existing customers or clients;

A reporting institution shall establish and maintain records of all transactions, containing particulars sufficient to identify the name, physical and postal address and occupation (or where appropriate business or principal activity) of each person conducting the transaction or on whose behalf the transaction is being conducted, as well as the method used by the reporting institution to verify the identity of that person. Also the reporting institution shall ensure that its customer accounts are kept in the correct name of the account holder; and

A reporting institution shall establish and maintain internal controls and internal reporting procedures to identify persons to whom an employee is to report any information which comes to the employee’s attention in the course of employment and which gives rise to knowledge or suspicion by the employee that another person is engaged in money laundering.

The Act provides in Part II, sections 3 to 15 for the situations that would constitute an offence whereas section 16 provides for the punishments attached to the offences. These can be tabulated as follows:

 

SECTION

OFFENCE CREATED

PUNISHMENT

(as contemplated in section 16)

3.

A person who reasonably knows that property forms part of the proceeds of crime and—
(a) enters into any agreement/transaction with anyone in connection with that property whether it is legally enforceable or not; or
(b) whether independently or with another person, performs any act in connection with such property, whose effect is to—

(i) conceal or disguise the nature, source, location, disposition or movement of the said property or the ownership thereof or any interest which anyone may have in respect thereof; or

(ii) enable or assist any person who has committed or commits an offence to avoid prosecution; or

(iii) remove or diminish any property acquired as a result of the commission of an offence.

(a) in the case of a natural person, imprisonment for a term not exceeding 14 years, or a fine not exceeding Kshs. 5,000,000.00 or the amount of the value of the property involved in the offence, whichever is the higher, or to both the fine and imprisonment; and

 

(b) in the case of a body corporate, a fine not exceeding Kshs.25,000,000.00, or the amount of the value of the property involved in the offence, whichever is the higher.

4.

A person who acquires; or uses; or has possession of property and who, at the time of acquisition, use or possession of such property, reasonably knows that it forms part of the proceeds of a crime committed by another person.

(a) in the case of a natural person, imprisonment for a term not exceeding 14 years, or a fine not exceeding Kshs. 5,000,000.00 or the amount of the value of the property involved in the offence, whichever is the higher, or to both the fine and imprisonment; and

 

(b) in the case of a body corporate, a fine not exceeding Kshs.25,000,000.00, or the amount of the value of the property involved in the offence, whichever is the higher.

5.

A person who wilfully fails to comply with an obligation to report suspected money laundering activity (as contemplated in section 44(2))

(a) in the case of a natural person, imprisonment for a term not exceeding 7 years, or a fine not exceeding Kshs.2,500,000, or to both; and

 

(b) in the case of a body corporate, a fine not exceeding Kshs.10,000,000.00 or the amount of the value of the property involved in the offence, whichever is the higher.

7.

A person who, knowingly transports, transmits, transfers or receives or attempts to transport, transmit, transfer or receive a monetary instrument or anything of value to another person, with intent to commit an offence.

(a) in the case of a natural person, imprisonment for a term not exceeding 14 years, or a fine not exceeding Kshs.5,000,000.00 or the amount of the value of the property involved in the offence, whichever is the higher, or to both the fine and imprisonment; and

 

(b) in the case of a body corporate, a fine not exceeding Kshs.25,000,000.00, or the amount of the value of the property involved in the offence, whichever is the higher.

8.

A person who reasonably knows that a report on suspected money laundering activity (under section 44) is being prepared or has been or is about to be sent to the Centre; and discloses to another person information or other matters which are likely to prejudice any investigation of an offence or possible offence of money-laundering.

(a) in the case of a natural person, imprisonment for a term not exceeding 7 years, or a fine not exceeding Kshs.2,500,000, or to both; and

 

(b) in the case of a body corporate, a fine not exceeding Kshs.10,000,000.00 or the amount of the value of the property involved in the offence, whichever is the higher.

9.

A person who knowingly makes a false, fictitious or fraudulent statement or representation, or makes, or provides, any false document, knowing the same to contain any false, fictitious or fraudulent statement or entry, to a reporting institution, or to a supervisory body or to the Centre.

(a) in the case of a natural person, imprisonment for a term not exceeding 2 years, or a fine not exceeding Kshs.1,000,000.00, or to both; and

 

(b) in the case of a body corporate, to a fine not exceeding Kshs.5,000,000.00 or the amount of the value of the property involved in the offence, whichever is the higher.

10.

Any person who wilfully gives any information to the Centre or an authorised officer knowing such information to be false.

(a) in the case of a natural person, imprisonment for a term not exceeding 2 years, or a fine not exceeding Kshs.1,000,000.00, or to both; and

 

(b) in the case of a body corporate, to a fine not exceeding Kshs.1,000,000.00 or the amount of the value of the property involved in the offence, whichever is the higher.

11(1).

A reporting institution that fails to comply with any of the requirements of sections 44, 45, and 46 (i.e. obligation to monitor and report suspected money laundering activity, obligation to verify customer identity and obligation to establish and maintain customer records), or of any regulations.

a fine not exceeding 10% of the amount of the monetary instruments involved in the offence.

12(3).

A person who wilfully fails to report the conveyance of monetary instruments into or out of Kenya, or materially misrepresents the amount of monetary instruments reported in accordance with the requirements of subsection (1).

a fine not exceeding 10% of the amount of the monetary instruments involved in the offence.

13.

A person who reasonably knows that information has been disclosed under the provisions of Part II; or that an investigation is being, or may be, conducted as a result of such a disclosure, and directly or indirectly alerts, or brings information to the attention of another person who will or is likely to prejudice such an investigation.

(a) in the case of a natural person, imprisonment for a term not exceeding 7 years, or a fine not exceeding Kshs.2,500,000.00, or to both; and

 

(b) in the case of a body corporate, a fine not exceeding Kshs.10,000,000.00or the amount of the value of the property involved in the offence, whichever is the higher.

14.

A person who intentionally refuses or fails to comply with an order of a court made under this Act.

(a) in the case of a natural person, imprisonment for a term not exceeding 2 years, or a fine not exceeding Kshs.1,000,000.00, or to both; and

 

(b) in the case of a body corporate, to a fine not exceeding Kshs.5,000,000.00 or the amount of the value of the property involved in the offence, whichever is the higher.

Defences

We note that the UK Bribery Act will come into force on 1st July, 2011 and accordingly the Ministry of Justice has released its guidance in relation to the said Act. The procedures in the guidance are: proportionate procedures, top-level commitment, risk assessment, due diligence, communication and monitoring and review, which, if followed would allow an entity to claim a defence that it implemented "adequate procedures" to prevent bribery. A similar defence structure does not exist in Kenya. Nonetheless, we would highlight that section 6 of the AML provides that, if a person is charged with committing an offence under section 3, 4, or 5, that person may raise as a defence the fact that he had reported a suspicion under the terms and conditions set forth in section 44 or, if the person is an employee of a reporting institution, that he has reported information pursuant to section 47(a). The ACECA provides at section 40 that it shall be no defence that the receiving, soliciting, giving or offering of any benefit is customary in any business, undertaking, office, profession or calling. Lastly, section 50 provides that it shall not be a defence that the act or omission was not within a person’s power or that the person did not intend to do the act or make the omission or that the act or omission did not occur. 

Walker Kontos in conjunction with Trinity International LLP.