Financial Crime World

Title: New Law Boosts Transparency in Kenya’s Business Sector: Extensive Disclosure Obligations under Anti-Money Laundering Act

Introduction

The Kenyan Government’s newly enacted Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2023, aims to foster greater transparency and accountability in the country’s business sector. This article outlines the new obligations for local and foreign companies and Limited Liability Partnerships (LLPs) under this comprehensive anti-corruption legislation.

Effective Date and Key Provisions

  • Effective date: September 15, 2023
  • Affected Entities: Companies, branches, LLPs, and foreign LLPs

Registers Required

Companies, LLPs, and their registrants are mandated to maintain and submit the following registers to the Registrar during the pre-registration process:

  1. Register of Beneficial Owners: Details natural persons controlling or owning a legal entity or arrangement.
  2. Register of Nominee Directors (for Companies): Natural persons holding the position of a director on behalf of a beneficial owner.
  3. Register of Nominee Partners (for LLPs): Natural persons instructed by a nominator to act on their behalf in a specific capacity.

Submission and Preservation of Records

The Kenyan Registrar must receive these documents within 60 days of the legislation coming into force (by November 15, 2023), with a 30-day extension option. Any amendment to the beneficial owner records must be communicated to the Registrar within 14 days. Past beneficial owners’ details must be preserved for an additional 10 years.

Consequences of Noncompliance

Failure to disclose beneficial owners could result in striking off the entity from the register by the Registrar and potential administrative penalties for noncompliance.

Discretion for Small Companies

  • Private companies with a paid-up capital of less than KES 5,000,000
  • Companies limited by guarantee

These entities can appoint a company secretary or a contact person who is a natural person with a permanent residence in Kenya. In the absence of a company secretary or a resident director, these entities must now designate a contact person. Established companies must submit a notice of appointment within 60 days of the legislation’s implementation.

Foreign Companies

Foreign companies with nonresident shareholders and directors will be mandated to appoint local representatives or company secretaries prior to the deadline.

Impacted Organizations

Entities should review their present ownership structures and arrangements and update their records to ensure compliance with the new regulations before the deadlines.While these changes may bring an increased compliance burden for affected entities, they are a significant step towards enhancing transparency and accountability in Kenya’s business sector.

Contacts for Inquiries

For further inquiries on thisAlert, please contact:

  • Ernst & Young (Kenya), Nairobi
  • Christopher Kirathe, Partner, Tax and Law
  • Milly Mbedi, Senior Manager, Law
  • Lavine Sange, Associate, Law

Footnote

*KES refers to the Kenyan shilling.