Kenya takes money laundering war to precious metal dealers
Kenya is targeting traders involved in precious metals as the new frontier to curb money laundering and combat terrorism financing.
The Kenyan government says it has tightened its response to money laundering after it was grey-listed by the Financial Action Task Force (FATF) in 2023.
The grey list contains countries that are actively working with the FATF to address loopholes in countering money laundering, terrorist financing, and proliferation financing. It is usually an indication of cooperation to end the vice, but with tasks pending to be accomplished. It means some of those dealers will be suspended until they rework their legality.
FRC Director General Saitoti Maika said the move adds to recent efforts to identify proceeds of crime and the combating of money laundering and proliferation financing.
As a matter of policy, dealers in precious metals and stones in Kenya are expected to report any cash transactions exceeding $15,000 as part of proposed anti-money laundering rules, part of steps to get the country off the FATF grey list.
Previously, the government widened reporting requirements to banks, Saccos and forex shops, requiring monies exceeding $10,000 to be reported and details of customers and their identification numbers correctly captured.
Mr Maika said dealers in precious metals and stones are susceptible to corruption, money laundering, and terrorism financing (ML/TF), especially since they weren't required to keep data on who buys their stones.'Precious minerals have been utilised in trade-based money laundering schemes, where they are exploited as a cover for laundering illicit funds through price manipulation or fake invoices for fictitious sales and tax evasion,' said Mr Maika.
Apart from customer details, precious stone dealers themselves will have to keep and provide documents about the legality of their operations in Kenya. They will be required to attach several documents, including a duly filled Form FRC RF 1-1 (available on the FRC website), a certified copy of a Certificate of Incorporation, a Kenya Revenue Authority (KRA) PIN, and the organisation's CR12 form.
Other required documents include a licence from the State Department of Mining (Regulator's licence), a group structure (where the institution has links to or is part of a group of companies), and an organisation structure clearly showing the position of the money laundering reporting officer (MLRO).
Additionally, dealers must provide details of ultimate beneficial owners, such as persons, passport copies in the case of any foreign directors, shareholders, or beneficial owners, and a duly filled DPMS Statistical Questionnaire.
In March this year, the national assembly in Kenya proposed amendments to the Proceeds of Crime and Anti-Money Laundering Act, seeking to bring precious metals dealers trading in gold, silver, and diamonds under the same reporting requirements as banks and other financial institutions.
The amendments tabled by Majority Leader Kimani Ichung'wah say that these institutions are required to flag and report large cash transactions to authorities as part of efforts to curb illicit financial flows.
Recent FATF study on diamond trading uncovered details of how the stone has been used as a method of money laundering.
Kenya had failed to address new and emerging risks such as terrorism, virtual assets and new payment methods that have continued to be threats to different countries in Africa to comply with Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) systems.
Kenya's is not unique as most of the countries in eastern and south Africa are yet to address the identified strategic deficiencies to combat money laundering and terrorist financing which is affecting confidence of investors in Africa.
In February 2024, Kenya and Namibia were grey-listed for failures. When categorised in the grey-list, countries struggle to get investments and traders from grey-listed countries generally struggle to get dealers across the line, especially with Western partners whose countries may caution against dealing with the grey-listed countries.
Kenya's law, the Proceeds of Crime and Anti-Money Laundering Act, imposes duties on banks in seeking to deal with money laundering. In the Act, banks are required to evaluate their customers thoroughly and the due diligence should be based on an assessment of the customer as a risk.
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