Combating money laundering: Setting the Criminal Assets Recovery Fund in motion will tighten the noose around the vice

  • 7 Aug 2023
  • 2 Mins Read
  • 〜 by Brian Otieno

The effect money laundering has on a country’s economy is both severe and extensive. Not only does it impact businesses and the economic health of a county but also has far-reaching implications for the financial sector, a critical component of a country’s economic growth and advancement prospects.

For an emerging market such as Kenya, the money laundering menace is even bigger. As the country continues to open up its economy and financial sector for investments, it has increasingly become an appropriate target for money laundering activities. As a result, the money demand in the country has become unpredictable alongside large fluctuations in international capital flows and exchange rates.

Kenya has put in place an elaborate regulatory framework (currently primed in Parliament for further amendments) to help tackle this menace, including the Proceeds of Crime and Money Laundering Act No. 9 of 2009 (POCAMLA) alongside other sector-specific laws like the Banking Act among others. To implement this elaborate regime, there are in place a number of administrative institutions whose roles revolve around regulation, supervision and enforcement of compliance with the anti-money laundering regulatory framework.

One such body is the Assets Recovery Agency (ARA).  Established under Section 53 of the Proceeds of Crime and Anti-Money Laundering Act No.9 of 2009, ARA is a body corporate charged with the mandate of combating money laundering, terrorist financing and proliferation financing through identification, tracing, freezing, seizure, and confiscation of proceeds of crime.

In a recent case involving the ARA, the High Court painted a picture of the need to further tighten the noose in the battle against money laundering. The Court reiterated that there is an underlying need to operationalise the Criminal Assets Recovery Fund. Painstakingly, despite being entrenched in law under Section 109 of the POCAMLA, regulations around the fund are yet to be enacted years later. The court noted that the current practice where monies forfeited as proceeds of crime are deposited in a bank account held under the ARA’s name is not only a grave omission or anomaly but also alarming.

The fact that the Critical Assets Recovery Fund has not been operationalized raises more questions than answers. This is in fact worsened by the fact that the current approach taken by the ARA is not foolproof from what the court referred to as the ‘second tier of corruption’. The non-operationalisation has made these funds susceptible to further misappropriation in the form of corruption, defeating the purpose behind the enactment of an elaborative framework on money laundering.

Additionally, amendments are being mooted on this elaborate framework including the increment on the minimum threshold for declaration and justification, which means this fund needs to be in place sooner rather than later. As pointed out earlier, as an emerging economy, Kenya is susceptible to being held further back by effects caused by money laundering. One way to make the anti-money laundering regime more effective is actualizing this fund.