Proposed law to compel lawyers to reveal financial deals with clients

Lawyers could soon be forced to disclose details of billions kept in their accounts on behalf of their clients if Parliament approves a proposed law.

Lawyers have been cited as posing a major hurdle in the anti-graft war over claims of aiding money laundering as well as serving as conduits for stolen public funds.

The state is now moving to make changes to a key law that has been offering legal cover for advocates to receive money on behalf of their clients.

The Proceeds of Crime and Anti-Money Laundering Bill, 2021, seeks to make lawyers among reporting persons answerable to the Asset Recovery Agency.

The bill seeks to include the Law Society of Kenya and Sacco Societies Regulatory Authority as supervisory bodies for purposes of reporting proceeds of crime.

This will also apply to SACCOs which would also be under obligation to report any transactions suspected to be arising from illicit cash sources.

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The bill, set to be read in Parliament when MPs resume sittings next week, would be a second attempt by the Kenyatta administration to dig into stolen wealth held in trust by lawyers for their clients.

The bill sponsored by National Assembly Majority Leader Amos Kimunya seeks to among other things force advocates to report all financial transactions they do on behalf of their clients.

“The obligations shall apply to the advocates, notaries and other independent legal professionals when preparing or carrying out transactions for their clients,” the bill reads in part.

This means that the Financial Reporting Centre will pounce on any person or institution where there are any “reasonable grounds to suspect that a transaction or proposed transaction may constitute money laundering or related activities.”

Lawyers stashing cash for clients

The new anti-corruption law further seeks to trace monies lawyers’ clients have used in the buying and selling of business entities.

This is the latest push by President Uhuru Kenyatta’s administration to tightened the war on graft by sealing ‘loopholes’ that have enabled the graft lords to acquire properties through stolen public funds.

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Under the proposal, advocates would therefore report their clients’ deals when buying and selling real estate, clients’ money and assets they are managing as well as bank savings and securities.

The proposed piece of legislation is also seen as part of a plan to tame politicians who also double as lawyers from representing clients in court on matters of corruption.

Legal professionals will now be under obligation to disclose how much their clients have contributed to the creation, operation, and management of companies.

In 2019, lawyers opposed then plans to scrutinise their clients’ cash deals when the state in the Finance Bill, 2019, proposed that they disclose such transactions.

Law Society of Kenya officials of that time said the proposed law “substantially affected the practice of law, rule of law and administration of justice.”

Presently, the bodies include the Central Bank of Kenya, Insurance Regulatory Authority, Betting and Licensing Control Board, Capital Markets Authority, ICPAK, Estate Agents Registration Board, NGOs Board, and Retirement Benefits Authority.

In the new changes, the Centre will come knocking if one is suspected to have acquired their wealth through proceeds of crime or proceeds of unlawful activities.

The surveillance will include “any property which is connected to the proceeds of crime or unlawful activities and related activities.”

The agency will also pursue the “proceeds of or property which is connected to an offence relating to the financing of terrorism and related activities.”

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The state further seeks to go after “property owned or controlled by or on behalf of, or at the direction of a person or entity identified or designated under the law on prevention of terrorism.”

ARA would therefore be empowered to stop any suspect transactions in respect of the funds or property affected by the flagged cash deals.

“…to allow the Centre to make the necessary inquiries concerning the transaction,” the bill reads.

Where the Centre considers it appropriate, it would “inform and advise an investigating authority, regulatory authority or tax agency” – in this case, the Kenya Revenue Authority.

In past efforts, the FRC has cited lawyers as an impediment to graft fight citing challenges with extracting information from lawyers of clients linked to graft cases.

The FRC believes that lawyers and their firms have been used by unscrupulous corrupt officials to hide stolen public funds citing scandals at the NYS and Nairobi county government.

The law is further being amended to deny the right to privacy to any persons suspected or accused of any offence under the proceeds of crime law.

“Where a person is suspected or accused of an offence under this Act, the person’s home or property may be searched, such person’s possessions may be seized, and information relating to that person’s financial, family or private affairs where required may be revealed.”

“…the privacy of a person’s communications may be investigated or otherwise interfered with,” the proposed law reads in part.

“A limitation of a right shall apply only for the purpose of the prevention, detection, investigation and prosecution of proceeds of crime, money laundering and financing of terrorism,” it adds.

In what may give ARA a freehand to prosecute its cases, the law is being changed to provide that “the Agency’s Counsel shall have the same privileges as State Counsel under the Office of the Attorney General in addition to any other powers they may have under the law.”

ARA is further pushing for independent budgetary allocation during the budgeting process at the National Assembly.

“The National Assembly shall allocate adequate funds to the Agency to enable the Agency to perform its functions under this Act and any other written law and the budget shall be a separate vote,” the bill reads.

The government also seeks to establish an oversight board to be known as the Asset Recovery Oversight Board with a secretary appointed by the Public Service Commission.

It shall comprise the Attorney General, Treasury Principal Secretary, the Director of Public Prosecutions, Director General of the National Intelligence Service, director-general of FRC, and the DCI.