KENYA Law and Practice Contributed by: Sammy Ndolo, Brian Muchiri, Nicholas Owino and Valere Nyaboke, Cliffe Dekker Hofmeyr
tions under POCAMLA, management must ensure that AI systems used in AML compliance meet the standards required by the Act. If the AI Bill is enacted, management will be respon - sible for conducting risk assessments and human and rights impact assessments and for maintaining records. Ultimately, however, the board retains final accountability for AI-related outcomes and associated risks, including regulatory, financial and reputational impacts. 8.3 Liability Exposures Arising From AI Use Disclosure Failures Boards and officers may incur liability for failure to disclose material AI-related risks. Under the Capital Markets Act, issuers are required to provide accurate and complete information to investors. The POLD Regulations require disclosure of all mate - rial risks in prospectuses and annual reports. Where AI systems are integral to a company’s operations or present significant risks (eg, reliance on algorithmic trading, AI-driven credit decisions or automated cus - tomer interactions), failure to disclose such reliance or associated risks may constitute a material omission. The CMA may impose administrative sanctions and affected investors may pursue civil claims for mis - representation or omission under common law or the relevant provisions of the Capital Markets Act. Data Protection and Privacy Breaches AI systems that process personal data expose organi - sations to significant liability under the Data Protection Act. Data Protection sets out data protection principles, including lawfulness, fairness, transparency, purpose limitation and data minimisation. Data controllers and processors are required to implement appropri - ate technical and organisational measures to protect personal data. In addition, the Data Protection Act specifically addresses automated decision-making, providing data subjects with the right not to be subject to deci - sions based solely on automated processing that sig -
nificantly affect them and the right to obtain human intervention. Breaches may arise from unlawful processing, inade - quate consent, lack of transparency regarding AI deci - sion-making or data security failures. Enforcement is primarily undertaken by the ODPC, which may impose administrative penalties. If the AI Bill is enacted, it will require providers and deployers of high-risk AI sys - tems to comply with the Data Protection Act, thus reinforcing these obligations. Unfair Practices and Consumer Harm AI-driven decisions or outputs that are misleading, discriminatory or unfair may expose companies to liability under the Consumer Protection Act. This includes situations where AI systems produce biased outcomes (eg, discriminatory credit scoring or insur - ance pricing) or fail to provide adequate transparency to consumers. The Consumer Protection Act prohibits unfair trade practices and provides for compensation for loss or damage. If the AI Bill is enacted, it will require adherence to ethical guidelines that address the prevention of bias, discrimination and exclusion, with particular regard to vulnerable groups. The AI Bill creates an offence for contravening ethical guidelines where such contra - vention results in bias, discrimination or harm to indi - viduals, punishable by a fine of up to KES1,000,000 AI systems are vulnerable to cybersecurity risks, including hacking, adversarial manipulation and data breaches. Under the Computer Misuse and Cyber - crimes Act, critical information infrastructure opera - tors are required to implement appropriate security measures. or imprisonment for up to six months. Cybersecurity and System Failures The Data Protection Act requires data controllers to implement technical and organisational measures appropriate to the risk. If the AI Bill is enacted, it will require providers and deployers of high-risk AI sys - tems to incorporate measures for robustness, accu - racy and cybersecurity. Failure to implement adequate security measures may result in regulatory enforce -
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