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KENYA: New ‘Know Your Customer’ Law Proposed for Shipping and Finance

More than 19 Kenyan government agencies are collaborating on a draft bill intended to curb illegal trade, and bringing greater transparency to the country’s shipping industry. The bill will also require banks and other financial institutions to identify who is sending and receiving money, and to assess the risk that the transaction might be used for illegal purposes.

The announcement follows a late February 2020 meeting in Mombasa between Interior Cabinet Secretary Fred Matiang'i, Central Bank of Kenya Governor Patrick Njoroge, the Director of Public Prosecutions, Noordin Haji, along with other senior government officials, at which the proposed law was endorsed by all parties. Njoroge said: “The criminal activities we experience in our financial institution linked to illegal freight trade has damaged and endangered Kenya's economy. In future, banks will have to adopt the ‘Know Your Customer’ scheme before any transaction is completed, but at the same time ensure there are few barriers in doing business."

The new law proposes that importers and exporters are compelled to identify the individuals or companies sending or receiving shipments from around the world. Banks and other financial institutions will also have to identify the senders and receivers of funds, as well as assess the risk that the transaction might be used for illegal purposes. The new bill has so far been backed by the treasury and the judiciary among others, who have argued that mandating import-export agents, shippers and brokers to carry out due diligence on their customers will help in the fight against money laundering, a problem that has long plagued Kenya.

Kenya is the financial hub for the East African region and also its largest economic and transport centre. Mombasa Port is the major trade gateway for much of the region. As such, it has become susceptible to the smuggling of illicit drugs, counterfeit goods and weapons, illegal timber and charcoal, and the trafficking of wildlife parts. For instance, the illegal trafficking of animal parts, such as ivory, tiger skins, and rhino horns, is estimated to be worth about US$19 billion per year.

The new law, commonly referred to as “Know Your Customer”, is already active in many developed nations, but once adopted by Kenya will make it the first African nation to do so. It is expected to align closely with the East Africa Protocol on the Prevention and Combating Corruption and Illegal Trade.

In a related development, the Kenyan government has also targeted private owners of jetties and landing sites which may be used for illicit trading. There are 693 private jetties and landing sites in the country which are not covered by the International Ship and Port Facility Security (ISPS) code, according to the Kenya Coast Guard Service. On 26 February, the Kenyan government ordered all such private jetties and landing sites in the country to be reviewed and registered with the ISPS code, which provides security measures on maritime vessels and port facilities.

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