Lawyers in Kenya Obligated to Report Clients Dealing in Dirty Money

The Law Society of Kenya (LSK) has agreed to a deal with the Financial Reporting Centre (FRC) that compels lawyers and their staff to report to the government any suspicious financial deals made by their clients. 

The obligation for lawyers, accountants, clerks, cleaners, notaries, and other independent legal professionals to report instances of money laundering was introduced in a 2019 amendment to the Proceeds of Crime and Anti-Money Laundering Act. However, the Law Society of Kenya had previously taken legal action to prevent its implementation. This change was made in an effort to curb the flow of illegally obtained funds. The FRC officials informed the MPs of this development during a hearing on the proposed Anti-Money Laundering and Combating of Terrorism Financing (Amendment) Bill, 2023.

“We have reached an agreement with LSK that it shall [regulate itself] and that lawyers will report on [deals involving dirty cash]. The lawyers had raised an issue with the requirement that they report on their clients. They said this goes against client advocate confidentiality but we have agreed in principle that the LSK will be the regulator,” FRC Director-General Saitoti ole Maika said. 

The Law Society of Kenya (LSK) is responsible for overseeing the compliance of lawyers, notaries, and other legal professionals with regulations related to anti-money laundering (AML), combating the financing of terrorism (CFT), and countering proliferation financing (CPF). Proposed amendments to the law would give the LSK the power to conduct on-site inspections and compel the production of necessary documents to fulfill its supervisory role. Violators could face monetary, civil, or administrative sanctions, and the LSK would be required to participate in interagency communication.

The Central Bank of Kenya (CBK) supports the changes, warning that the country risks being added to the Financial Action Task Force (FATF) “grey list” if it fails to address deficiencies by October. This could have negative impacts on international trade and banking relationships due to high AML/CFT/CPF compliance costs.