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CEOs risk 7-year jail, employment ban in terror financing crackdown
Kenya was grey-listed in February 2024 by the Financial Action Task Force (FATF) —a global anti-money laundering and terrorism financing watchdog— which cited shortcomings in the country’s financial oversight systems.
Chief executive officers and senior managers face up to seven years in jail, a ban from employment and deregistration of their firms under new guidelines aimed at fighting terrorism and weapons financing.
The country’s financial intelligence unit, Financial Reporting Centre (FRC), has published guidelines that introduce penalties for non-compliance with the updated Prevention of Terrorism (Implementation of the United Nations Security Council Resolutions on Suppression of Terrorism) Regulations published early this year.
The updated regulations empower the FRC to take action against managers, board of directors, and supervisory and executive management members found in breach of anti-terror financing guidelines.
Now FRC has made public ‘Guidance on the Implementation of Targeted Financial Sanctions for Reporting Institutions,’ which became effective in July this year, showing that it has introduced a ban from employment for senior executives of companies found breaching anti-terror regulations.
The rules require banks, insurance firms, casinos, accountants, real estate agents and dealers in precious stones, among others, to immediately freeze funds and other assets belonging to individuals or entities listed under the UN resolutions relating to suppression of terrorism financing and proliferation of weapons.
FRC enforcement actions include a warning letter, monetary penalty of up to Sh3 million for each violation, debarment from employment in a specific sector, suspension of persons responsible for the violation, suspension or restriction of firms in a specific activity or cancellation of their operating license.
“Any person, including reporting institutions, should report any funds or assets frozen or any other action taken in compliance with the relevant prohibition requirements, including attempted transactions, within 24 hours...” reads the guidance.
“Reporting institutions are subject to supervision on targeted financial sanctions implementation, and in case of non-compliance the relevant supervisory authority (FRC, relevant supervisory body or self-regulatory body) can apply enforcement actions.”
FRC says the rules seek to “provide practical and actionable instructions” and improve compliance with UN Security Council resolutions relating to the prevention and suppression of terrorism and terrorist financing and disruption of proliferation of weapons of mass destruction and its financing.
The FRC said freezing actions must be taken “without delay and without prior notice” —within 24 hours and reported promptly to the Counter Financing of Terrorism Inter-Ministerial Committee through the FRC.
“Any person who violates the targeted financial sanctions obligations as stipulated commits an offence and shall be subject, upon conviction, to a fine not exceeding three million shillings or imprisonment for a term not exceeding seven years,” the rules state.
The FRC sanctions are anchored in the Prevention of Terrorism Act and related regulations, which domesticate Kenya’s obligations under UN resolutions aimed at suppressing terrorism and curbing the financing of weapons of mass destruction.
Firms are required to screen customers, including beneficial owners and affiliates, against updated UN and domestic sanctions lists.
Matches must trigger immediate freezing of accounts, suspension of services and notification to authorities.
For instance, FRC says, banks must block access to accounts of listed individuals and stop all transactions while casinos are required to freeze gaming chips, balances and loyalty rewards of designated patrons.
Real estate agents are required to halt property transactions involving sanctioned persons while accountants and lawyers are barred from providing professional services that could facilitate asset transfers.
The guidance sets out procedures for reporting and, where applicable, unfreezing assets. It says exemptions may be allowed for basic expenses such as food, rent, or medical care, but only with written authorization from the Counter Financing of Terrorism Inter-Ministerial Committee.
Kenya’s move to tighten enforcement comes amid heightened global scrutiny of financial flows linked to terrorism and the proliferation of weapons of mass destruction.
The measures seek to prevent the exploitation of the financial sector by groups such as ISIL, Al-Qaida, Al-Shabaab, the Taliban, and entities associated with North Korea’s nuclear programme.
The FRC move is part of a broader campaign to tighten compliance, expand customer due diligence and prevent financial transactions from becoming conduits for illicit finance.
The country was grey-listed in February 2024 by the Financial Action Task Force (FATF) —a global anti-money laundering and terrorism financing watchdog— which cited shortcomings in the country’s financial oversight systems.
Authorities are under pressure to plug gaps identified in the FATF review.
