KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Valere Nyaboke, Cliffe Dekker Hofmeyr
bank can only undertake “banking business” and is not permitted to undertake any other type of business. 2.14 Impact of AML and Sanctions Rules The Proceeds of Crime and Anti-Money Laundering Act, Cap 59A of the Laws of Kenya (POCAMLA) sets out the rules and obligations that various types of “reporting institutions” must comply with. A fintech entity becomes subject to POCAMLA if it falls within the Act’s definition of a “reporting institution”. Under POCAMLA, a “reporting institution” is defined as a financial institution or a designated non‑financial business or profession. A financial institution is a per - son or entity that conducts business in any of the fol - lowing activities or operations: • accepting deposits and other repayable funds from the public; • lending, including consumer credit, mortgage credit, factoring (with or without recourse), and financing of commercial transactions; • issuing and managing means of payment (such as credit and debit cards, cheques, travellers’ cheques, money orders, bankers’ drafts, and elec - tronic money); • participation in securities issues and the provision of financial services related to such issues; • investing, administering, or managing funds or money on behalf of other persons; • underwriting and placement of life insurance and other investment‑related insurance; and • money and currency changing. Any fintech engaging in these activities would fall within the definition of a “reporting institution” and would therefore be subject to POCAMLA. Reporting institutions must comply with obligations that include: • monitoring all complex, unusual, suspicious, large, or otherwise noteworthy transactions on an ongo - ing basis; and • reporting suspicious or unusual transactions or activity to the Financial Reporting Centre whenever there is reason to suspect that such transactions may constitute or relate to money laundering or the proceeds of crime.
In addition, under the DCP Regulations, NDCPs are required to provide the Central Bank of Kenya (CBK) with evidence of the sources of funds invested or intended to be invested in their business. This require - ment is intended to ensure that such funds do not originate from criminal activity. Furthermore, market intermediaries are required to obtain the following information from their clients before placing any investment order on their behalf: • details regarding the origin of funds used or intended to be used for the investment, including confirmation from the remitting entity (where funds originate from outside Kenya) regarding the client’s business and the source of the funds; and • a written statement from the client verifying the accuracy of the information provided and confirm - ing that the funds are not the proceeds of money laundering or other illegal activities. 2.15 Financial Action Task Force (FATF) Standards Anti‑money laundering and sanctions regulations in Kenya are generally aligned with the standards set by the Financial Action Task Force (FATF). Key Kenyan AML legislation – such as the Proceeds of Crime and Anti‑Money Laundering Act (POCAMLA) and the Pre - vention of Terrorism Act, CAP 59B – closely follows FATF Recommendations. In addition, various financial sector laws have been amended to explicitly assign regulatory authorities – including the Central Bank of Kenya, the Capital Mar - kets Authority, and the Insurance Regulatory Authority (IRA) – with responsibility for regulating, supervising, and ensuring compliance with anti‑money laundering, combating the financing of terrorism, and countering proliferation financing measures for all reporting insti - tutions within their respective jurisdictions. 2.16 Reverse Solicitation In Kenya, there is no single, uniform approach to reverse solicitation, and the applicable rules vary across different sectors. For example, in the capi - tal markets sector, securities issued outside Kenya cannot be offered to Kenyan citizens within Kenya – even in reverse solicitation scenarios – without prior
469 CHAMBERS.COM
Powered by FlippingBook