The Institutional Challenges Facing Implementation of Anti-money Laundering Law in Kenya

Abstract

With the enactment of Anti Money Laundering (AML) and terrorism prevention laws in 2012 and supporting subsidiary legislation addressing the many deficiencies, Kenya is considered compliant with international AML and Combating Financing of Terrorism (CFT) standards. Key institutions have been established to support the AML combating efforts such as the Financial Reporting Centre (FRC). The FRC mandated to assist with the identification of the proceeds of crime and the combating of money laundering. Another key institution established by the AML law is the Asset Recovery Authority (ARA), established to provide for the identification, tracing, freezing, seizure and confiscation of the proceeds of crime. Nevertheless, challenges remain in achieving comprehensive and effective implementation of AML laws and regulations because common AML risks such as poor inter-agency co-ordination between all Government agencies involved in combating AML, specific institutional weaknesses within the FRC, AMLAB and ARA, continued transnational organized crime, tax evasion, corruption, illicit trade flows, theft and drug trafficking continue to hinder these efforts. It is therefore clear that the POCAMLA and related AML laws have been tested and challenged and the gaps are glaring in the wake of increased levels of cyber fraud, globalisation, grand corruption and porous AML laws. It is for this reason that, the detection and reporting mechanisms need renewed interrogation in the wake of the unprecedented disconnect between the AML legal framework and practice.Moreover, as is the case with many other issues, politics of the day greatly aggravates this disparity.This study therefore investigates the three main institutions created by the POCAMLA, the AMLAB, FRC and ARA and identifies the constraints that impede them from being robust and effective as well as propose policy changes and reforms.