Sector Specific Compliance Obligations

1. Betting, SACCOs, Retirement Schemes, Mining, Real Estate, Accounting, Legal & Compliance Secretarial Services, key obligations include:
2. Implement Customer Due Diligence (CDD) and customer identity verification.
3. Reporting suspicious transaction to the Financial Reporting Centre (FRC).
4. Proper recording keeping of transactions.
5. Staff training on AML/CFT risks and developing internal compliance controls.

• Public Benefit Organizations (PBOs):

Regulation, supervision and enforcement of compliance for AML purposes including:

• Implementing internal controls to prevent abuse of terrorism financing, including due diligence on donors and beneficiaries, record-keeping, and reporting suspicious activities.
• Developing focused, proportionate and risk-based actions to address Terrorism Financing Risks posed by such public benefit organizations.
• Periodically conducting an assessment of the terrorism financing risks posed to such public benefit organizations.

• Dealers in Precious Metals and Dealers in precious stone, key obligations include:
• Registering as an officially reporting entity.
• Implementing Customer Due Diligence (CDD) and customer identity verification.
• Monitoring high value transactions including when engaging in any cash transaction with a customer equal to or above fifteen thousand US Dollars ($15000).
• Avoiding informal trading practices that could raise red flags.

• Members of Professional Bodies (ICPAK, ICPSK, Estate Agents Board, LSK), key obligations include:
• Integrating AML/CFT practices into daily operations.
• Complying with professional body supervision requirements.
• Preventing misuse of professional services for illicit activities.

If your business falls in any of the above, you need to ask:

1. Have you assessed the money-laundering and terrorism-financing risks covering you customer base, services & products, geographic exposure, and transaction types and limits?
2. Are your identification, verification and screening procedures including beneficial ownership up to date? (including Enhanced Due Diligence (EDD))
3. Are your records properly maintained (transactions, client identities) and internal reviews for the required period?
4. Do you have documented AML/CFT policies, periodic training, framework, internal audits and a designated compliance officer?
5. Do you have procedures in place to flag and report suspicious transactions to the Financial Reporting Centre (FRC) or other competent authority?
6. Do you provide training to your staff and enforce internal controls (segregation of duties, approval thresholds, monitoring)?
7. Is senior management aware and accountable? Are there oversight procedures including sanctions, non-compliance, and escalation processes?
8. Are you prepared for regulatory inspection, peer review or audits of your compliance framework?

Even businesses with internal compliance teams or Artificial Intelligence (AI) compliance systems often discover gaps only during regulator inspections, the right independent review from a consultant will not only save your business from financial and reputational risks but boost regulatory confidence.

In addition, the Act outlines heavy fines and imprisonment as part of penalties for Non-Compliance:

General Provisions (All Sectors and Reporting Institutions):

• Financial fines:
• Of between Kes. 5M to Kes. 20M for legal persons and between Kes. 1M to Kes.10M for natural persons.
• Additional penalties not exceeding one hundred thousand shillings in each case for each day or part thereof during which such violation or non-compliance continues.
• Imprisonment: financing of terrorism attracts a term not exceeding 20 years for a natural person or a fine not exceeding Kes. 20 M for a legal person.

The March 2026 deadline is only four months away, being proactive reduces exposure to fines, imprisonment, and reputational risk while strengthening both investor and regulatory confidence.  At Riskhouse International Limited, our free 30 minutes AML/CFT Health Check & Independent Assessment gives you clarity on your obligations and breaks what needs to be done into practical, sector-specific obligations, whether you are a PBO, Betting or Precious Dealer.  

At RISKHOUSE INTERNATIONAL, our multi-disciplinary team combines legal, risk, and compliance to provide an objective review of policies and controls, specialized guidance in ESG, Crypto, and AI governance, AML/CFT policies, access to benchmarking and best practices from multiple industries, and efficient implementation support. This allows your internal teams to focus on execution while ensuring that your governance framework is comprehensive, practical, and strategically aligned, turning policies into organizational growth.

The post The Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act 2025: Is your Business Ready for March 2026? appeared first on Riskhouse International Limited.

However, while CBK & CMA aims to protect consumers by licensing and overseeing service providers, it cannot fully eliminate the wave of scams flourishing on social media platforms like Telegram, WhatsApp, TikTok, Twitter/X, and Instagram.

The Psychology Behind Crypto Scams

Scammers and Influencers prey on human psychology, exploiting greed and the fear of missing out (FOMO), to lure victims with false promises of quick, guaranteed returns. In addition, buzzwords such as “CBK licensed” or “CMA regulated” will be frequently misused to create a false confidence and to persuade people to invest, often without verifying the legitimacy.

Key Social Media Cryptocurrency Scams to Watch Out for:

1. Cryptocurrency-based Ponzi Scheme: Aggressively advertised on WhatsApp or Telegram groups promising high, risk-free returns.
2. Cryptocurrency-based Job scams: Scammers posing as legitimate company employees lure victims through social media posts or text messages offering fake part-time jobs and assigning fake click-based tasks through scam websites.
3. Pump and dump schemes: Scammers use social media to artificially hype up a low-value cryptocurrency, spreading false claims to drive up its price and later sell causing the price to crash.
4. Impersonation Scams: Fraudulent profiles mimicking exchanges, regulators like CBK or CMA, or industry influencers to gain trust and steal funds.
5. Fraudulent Celebrity Endorsements: Deepfake videos/ audio using AI, fake testimonials, or paid influencers on Instagram, TikTok, or Facebook promoting fake ICOs and Coins.
6. Phishing links: post pushing a link via DMs to “claim tokens”, verify an account” or “fake transactional approval prompts”, once link is clicked the scammer steals the cryptocurrency.
7. Pig butchering scams (also known as Romance scams): a long-term investment scam, often involving cryptocurrency, where scammers “fatten up” the victim (“the pig”) with trust and affection before “butchering” them, i.e. stealing a large amount of money.

According to Chainalysis (Blockchain Analytical firm), approximately $9.9billion was lost to crypto scams globally in the year 2024. In addition, recent reports from Kenya and Nigeria, an estimated amount of $840million was lost by investors, through Crypto Bridge Exchange(CBEX), which advertised itself as a “crypto-powered trading platform backed by artificial intelligence, promising tantalizing returns of up to 100% in just 30 days”,  and required only a simple sign-up through a website or app, often shared via WhatsApp or Telegram by trusted friends” (Source:  Chainalysis.com , Kenyanwallstreet.com)

While the VASP Act strengthens oversight of Virtual Asset Service Providers, it does not extend to the informal and fast-moving world of social media where scams thrive. Regulations is critical foundation, but effective protection requires a layered approach, combining consumer education, and expert advice.

At RISKHOUSE INTERNATIONAL, we help our clients navigate Kenya’s evolving crypto landscape with confidence. Our tailored services include risk assessments, scam awareness training, Blockchain forensics, and regulatory crypto compliance. We boast of a team of expert investigators who integrate fraud and risk management, regulatory compliance, blockchain forensics, and legal advisory to build frameworks that reflect both the regulator’s expectations and market realities. Partner with RISKHOUSE INTERNATIONAL, to assess your readiness, identify exposure, and build crypto compliance systems that work in practice to stay competitive in Kenya’s Crypto regulatory landscape.

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The coming into force of Kenya’s Virtual Asset Service Providers Bill, 2025 into law on 15^th October 2025 marks a turning point for the country’s fast-growing digital asset market. The Act not only establishes a formal regulatory framework but also redefines how accountability, investor protection, and market stability will shape the crypto regulation sector going forward.

For crypto traders & enthusiasts, exchanges, and investors, this is more than a legal milestone – it’s a structural shift that determines who thrives under the new rules or legitimacy.

Kenya’s Crypto Adoption

According to Chainalysis (Blockchain Analytical firm) 2024 Global Crypto Adoption Index, Kenyans transacted Kshs 426billion between July 2024 and June 2025 through crypto. In addition, the firm ranked Kenya as fourth globally in its adoption of stablecoin (a cryptocurrency pegged to a dollar). These positions Kenya as leader in East Africa on Crypto adoption and transaction volume. (source: Chainalysis 2024).

What the Law Requires

The Act defines a Virtual Asset (VA) as a “digital representation of value that can be digitally traded or transferred and can be used for payment or investment purposes and does not include digital representation of fiat currencies, e-money, securities and other financial assets”

It classifies Virtual Asset Service Providers (VASPs) (Local or Foreign company):

1. An Exchange – facilitating the exchange of virtual assets for fiat currency or other virtual assets for fiat currency or other virtual assets on behalf of third parties
2. Custodian- holding custody or controls virtual assets on behalf of its clients to facilitate an exchange
3. Broker- purchases virtual assets from a seller when transactions or bids and offers are matched in order to sell them to a buyer,

The Act, through Parts III-V, establishes three core compliance pillars for all Virtual Asset Service Providers (VASPS):

1. Regulatory Compliance

All VASPS must now be licensed by the Capital Markets Authority (CMA) or the Central Bank of Kenya before offering services. They must maintain a registered office in Kenya, demonstrated capital adequacy, solvency, and insurance, and notify the CMA or CBK of ownership or structural changes.  VASPs must also meet cybersecurity standards under the Computer Misuse and Cybercrimes Act and satisfy the Authority that they can comply with consumer and data protection laws.

• Customer Protection and Governance

VASPs are required to act with fairness, transparency, and integrity, avoiding conflict of interest and safeguarding clients’ assets. All marketing and promotional materials must be fair, clear, transparent, and not misleading. VASPs must also submit audited financial statements, report cyber or solvency incidents, and ensure directors are fit and proper.

• AML/CFT/CPF Obligations

VASPS are subject to POCAMLA and the Prevention of Terrorism Act, with full accountability for due diligence, transaction monitoring, sanction screening, and suspicious activity reporting.

Risks of Non-Compliance

Failure to comply may trigger license suspension, banking restrictions, regulatory audits and reputation risks.

In addition, the VASPs may be exposed to financial penalties and criminal liability as stipulated under Section 41: Offences and penalties:

For:

a) Individuals to a fine not exceeding Kshs. 10M($77K) or to imprisonment not exceeding ten years or both;

(b) A company, to a fine not exceeding Kshs. 20M($154K) or suspension.

Why Expert Interpretation Matters

The Act’s principles-based design leaves room for regulatory expectation. Knowing how to apply these standards practically requires expertise across law, risk and blockchain forensics.

At RISKHOUSE INTERNATIONAL, we boast of a team of expert investigators who integrate fraud and risk management, regulatory compliance, blockchain forensics, and legal advisory to build frameworks that reflect both the regulator’s expectations and market realities. Partner with RISKHOUSE INTERNATIONAL, to assess your readiness, identify exposure, and build crypto compliance systems that work in practice to stay competitive in Kenya’s Crypto regulatory landscape. Request a VASP Compliance Audit today!

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Key aspects of land due diligence include: 

1. Title verification – confirming legal ownership and whether the title is clean, valid, and unencumbered. 

2. Land use/zoning compliance – checking if the intended use aligns with planning regulations. 

3. Historical ownership – tracing the land’s ownership chain to ensure no prior fraud or illegality. 

4. Regulatory approvals – verifying survey plans, environmental clearances, and subdivision approvals. 

5. Physical inspection – visiting the site to identify boundary disputes, encroachments, or occupation issues. 

Land due diligence protects the buyer from legal disputes, fraud, and investment risks by ensuring informed, lawful, and secure land transactions. 

CASE STUDY 

SEHMI & ANOTHER V. TARABANA COMPANY LIMITED & 5 OTHERS [2025] KESC 21 (KLR) 

Facts of the Case 

Harcharan Singh Sehmi and Jaswarana Sehmi, the 1^st and 2^nd Appellant, are brothers and the initial lessees of the suit property situated in Ngara, Nairobi. The parcel of land was initially leased to the Sehmi family for a 59-year lease beginning 1942. The Lessor was the Government of Kenya. As the lease neared its expiry in 2001, the Sehmi family applied for a renewal of the lease. As part of the lease renewal process, the brothers received letters from both the Commissioner of Lands and Director of Physical Planning, who each confirmed that there were no objections to the lease renewal. Unfortunately for Harcharan Singh Sehmi and Jaswarana Sehmi, the lease was never formally extended due to administrative delays by the Lands Office.  

In 2009, the suit property was unlawfully and unprocedurally transferred to Rospatech Limited, (the 2^nd Respondent). In 2014, Rospatech Limited transferred the suit property to Tarabana Company Limited for a consideration of Kes. 24,000,000/-. Following the transfer to Tarabana, (the 1^st Respondent), the Sehmi family were evicted from the suit property and the 1^st Respondent constructed an eight-story building on said property.  

The two brothers filed a suit at the Environment and Land Court (ELC) in Nairobi. The ELC determined that Harcharan Singh Sehmi and Jaswarana Sehmi were the rightful owners of the property. The trial court therefore, nullified the 1^st and 2^nd Respondents’ titles and reinstated the Sehmi’s titles.  

The Respondents then appealed to the Court of Appeal. The Court of Appeal reversed the trial court’s decision, and found that the 1^st respondent was an innocent purchaser for value, and that therefore, Tarabana Company Limited had a legitimate right over the suit property.  

Harcharan Singh Sehmi and Jaswarana Sehmi are now the appellants in this suit before the Supreme Court of Kenya, seeking to quash the decision of the Court of Appeal.  

Issues before the Supreme Court of Kenya 

• What is the meaning, scope and extent of applicability of the doctrine of Bona fide/Innocent Purchaser for value without Notice? 

• Does the doctrine of Bona fide/ Innocent Purchser for Value Without Notice protect a purchaser of an illegally/irregularly allocated title over Public Land? 

• To what extent, if at all, is the doctrine of Legitimate Expectation applicable to the renewal of leases over public land? 

Rule of Law 

The Supreme Court of Kenya in reaching its decision relied on the following provisions of law; 

• Section 26(1) of the Land Registration Act, 2012 

• Article 47 of the Constitution of Kenya 

• Principles of legitimate expectation 

• Doctrine of innocent purchaser for value 

Analysis  

(Paragraph 8) “Holders of impugned titles, especially those acquired before the promulgation of the 2010 Constitution always called into service the provisions of section 23 of the Registration of Titles Act (repealed) on indefeasibility of title. Pursuant to section 23, a certificate of title was held as conclusive evidence of proprietorship. Upon repeal (of the Registration of Titles Act), the effects of registration are now governed by section 26 of the Land Registration Act.” 

(Paragraph 9) “Section 26 of the Land Registration Act provided that the proprietor shall not be subject to challenge, except on the ground of fraud or misrepresentation to which the person is proved to be a party; or where the certificate of title has been acquired illegally, unprocedurally or through a corrupt scheme. Under the Registration of Titles Act (repealed), a certificate of title was to be regarded by courts as conclusive evidence that the person named therein was the absolute and indefeasible owner of the land. However, under Land Registration Act, a certificate of title was to be regarded by courts as prima facie evidence that the person named therein was the absolute and indefeasible owner of the land. It was therefore no longer possible for a title holder to erect the certificate of title as a barrier to an inquiry into its legality or otherwise.” (emphasis ours) 

The Supreme Court in reaching its conclusion found that you cannot confer a bad title. A holder of an illegal title cannot possibly confer a legal title. In other words, there is no legality that can arise from an illegality. 

The Court further explained that it is not sufficient that a person sites the doctrine of innocent purchaser for value. But such a person claiming under this doctrine must show that, one, he purchased a legal estate/estate was purchased legally, and two, that there was at the time no notice or equitable interest registered against the property.  Paragraph 11, “A purchaser would only be regarded as bona fide if he bought property in good faith without notice of any defect or claims against the title. So that if the title in question was illegal or obtained through unlawful meant, the purchaser could not claim protection even if he was not aware of the illegality.” 

Determination of the Court 

The Court determined that the 2^nd Respondent obtained the suit property illegally. Therefore, having an illegal title of land, the 2^nd Respondent was incapable of passing a valid title to the 1^st Respondent. Further, the doctrine of bona fide purchaser for value could not be invoked to protect a title to an illegally acquired public land. The Court emphasized that due diligence requires more than just reliance on a title deed or registry search—it includes investigation into how the title was acquired, especially where the land was previously under government lease or occupation. 

The Court determined; 

1. The Judgment of the Court of Appeal, dated 8^th October 2021 is overturned 

2. The Petition of Appeal dated 23^rd November 2023 is allowed 

3. The Chief Land Registrar (3^rd Respondent) is directed to effect a cancellation of the 1^st Respondent’s title from the Proprietorship Section of the Land Register 

4. The Chief Land Registrar (3^rd Respondent) is directed to make an entry in the Proprietorship Section of the Land Register to reflect the appellants as the proprietors of the suit property in accordance with the provisions of the Land Registration Act 

5. The structures and developments erected by the 1^st Respondent on the suit property be removed and demolished by the 1^st Respondent within six months from the date of this Judgment under the supervision of the 5^th respondent 

CONCLUSION 

Land due diligence is not just a procedural step; it is a critical safeguard in any real estate transaction. By thoroughly investigating legal titles, zoning regulations, environmental conditions, and other potential encumbrances, stakeholders can mitigate risks, prevent costly disputes, and make informed investment decisions. Whether you’re a developer, investor, or end-user, comprehensive due diligence ensures that your land acquisition is not only legally sound but strategically wise. In an industry where oversights can lead to long-term setbacks, due diligence is your first and most essential line of defence.  

In Sehmi & another V. Tarabana Company Limited & 5 others [2025] KESC 21 (KLR), the Supreme Court recognised the huge investment made by the 1^st Respondent on the suit property but determined that even equity cannot cure an illegality. This decision by the highest Court in the country places greater responsibility on buyers, lawyers, and developers to investigate the authenticity of titles and avoid complicity in irregular allocations. 

Due diligence is not a box-ticking exercise. Land buyers especially, must go beyond the surface; verifying not just the existence of a title but also its valid origin and compliance with legal processes. Further, a registered title acquired through illegality cannot be protected. The need to uphold rule of law, land governance principles, and constitutional protections outweighed the financial loss incurred by the developer. 

At RISKHOUSE INTERNATIONAL, we boast of a team of expert investigators who have continually assisted our clients with their due diligence needs, through a mix of analysis of publicly available information, human source inquiries and overt investigations. Our team incorporates specialists in intelligence analysis, financial investigations, cyber security and legal advisory allowing our clients to make informed decisions and manage or avoid altogether, potential risks. Kindly reach us on email at info@riskhouse.co.ke. We are capable, willing and would be happy to help you with all your background checks needs. 

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Asset tracing is the process of identifying and locating assets that are concealed or difficult to find. This involves following a trail of financial transactions, ownership records, and other documentation to track down assets. Effective tracing and recovering assets are crucial in cases of commercial disputes and civil fraud. It plays a key role in the recovery of the proceeds and is a core component of specialised recovery services aimed at addressing financial misconduct and fulfilling legal obligations. 

Importance of Asset Tracing  

Asset tracing plays a crucial role in maintaining financial integrity and ensuring justice in various scenarios. Here are a few reasons why this process is important: 

Fraud Prevention 

Asset tracing helps to uncover civil fraud and recover stolen or misappropriated assets. By identifying hidden assets and methods used to conceal assets, it becomes possible to address and rectify financial misconduct. 

Debt Collection 

For creditors and businesses, asset recovery is crucial for collecting outstanding debts. Using recovery services to trace funds ensures that creditors can pursue repayment and secure the assets needed to satisfy financial claims. 

Divorce Settlements 

In divorce proceedings, asset tracing can help ensure that marital assets are fairly divided. Identifying hidden assets ensures an equitable settlement and protects the financial interests of both parties. 

Legal Compliance 

Asset recovery supports legal compliance by ensuring that individuals and entities meet their financial obligations. It helps uphold contractual agreements, enforce judgments, and resolve disputes. Legal advice from a specialist is often crucial in navigating these processes, ensuring that recovery efforts are aligned with legal requirements and effectively managed. 

Aset tracing is a vital process for locating assets that may be hidden or disputed. By employing a combination of investigative techniques and legal actions, individuals and businesses can address financial misconduct, recover debts, and ensure fair asset distribution. Understanding the principles and methods of asset tracing and recovery can help in effectively managing financial disputes and protecting one’s financial interests. 

At Riskhouse International, this is one of the key services we offer to law firms, financial institutions, NGOS, SMES, individuals and other reputable organizations. If you have any questions about our service or would like to discuss your matters with us in greater detail, please contact the Business Development Team on 0792603759.  

To learn more about this and catch up on our other news and alerts you may visit our blog on our website at https://riskhouse.co.ke/blog/.  

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Occupational fraud typologies highlight different forms of fraud, one of which is corruption. Business corruption is categorized as the second most common type of occupational fraud, with the primary examples being bribery, conflict of interest, improper gratuities, and economic extortion. Bribery and corruption pose significant risks to organizations as they may be subjected to legal, regulatory, and reputational damage. Additionally, a history of corruption can constitute a reputational risk that if not mitigated, may drive away investors, partners, clients, and future employees.

Therefore, zero tolerance for bribery and corruption is essential as it ensures sustainability and business integrity in any organization. Organizations should have robust policies, procedures, and programs to mitigate bribery and corruption risks. Organizations should also train and educate stakeholders to increase their understanding and awareness. An effective Anti-Bribery and Anti-Corruption program should lay focus on the following key areas: –

• • Top management commitment – this entails tone at the top and senior management commitment to upholding ethical conduct and integrity.
  • Risk Assessment – this entails assessments and subsequent assessments of the organization’s bribery and corruption risks.
  • Proportionate Procedures – this involves developing procedures based on risk assessment and ensuring that there is an investigation procedure in place.
  • Training and Information Communication – this involves training all levels of employees on whistleblowing and mechanisms of reporting bribery and corruption.
  • Due Diligence – this involves applying appropriate due diligence procedures to third parties including name screening, integrity, and corruption checks.
  • Monitoring and Review – this involves a continuous evaluation and validation of anti-bribery and anti-corruption programs.

At Riskhouse International, we help organizations spanning multiple jurisdictions to define, assess and respond to bribery and corruption issues. Further, we help organizations identify gaps and provide recommendations for mitigating bribery and corruption risks. We also support organizations with comprehensive Anti-Bribery & Anti-corruption (ABAC) reviews, reviews of the existing relevant legislation, review of the existing policies and procedures, conducting transactions reviews and verifications of third parties.

To learn more about this and to catch up on our other news and alerts you can visit our blog on our website at https://riskhouse.co.ke/blog/.

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A network environment can be defined as a communications system that ties multiple users together. In such an environment, there is a need to establish control measures to detect advanced threats in the network. The security mechanism measures should identify the threat’s movement in, out, and laterally within the environment.

There is a need to establish a network detection response (NDR) that can identify and allow rapid and efficient response to threat incidents and analyze the network traffic matrix. This will enable the identification of zero-day exploits and unknown unidentified threats to enhance advanced security threat hunting and detection capabilities.

The organization should embrace the following practices to prevent the threats: –

1. Human expertise – security experts should have the ability to observe and act on incidents for the purpose of preventing major damages the business may encounter.
2. An automated response – there is a need for integration and automation of security appliances to be capable of taking actions to block and mitigate potential threats as they are detected. This can be done by automatically blocking traffic from active IP addresses that are identified as known threats.
3. Artificial Intelligence/ Threat Intelligence – this is the integration of network devices and other applications by use of intelligence that feeds up-to-date information on known threats and cybercrime attackers on a network.

At Riskhouse International, we assist the management and organizations to develop policies and standards that assess security control measures and embrace a healthy network environment. To learn more about this service and to catch up on our updates and alerts you can visit our website at https://riskhouse.co.ke.

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Criminals launder money mainly using the financial system to transfer funds. Financial institutions, especially banks, are most vulnerable to abuse for laundering purposes. To protect themselves, financial institutions must have adequate controls and procedures in place that enable them to know the person whom they are dealing with. Enhanced due diligence on new and existing customers is a key part of these controls.

The application of thorough Customer Due Diligence (CDD) measures by financial institutions and a high degree of transparency is crucial to fight money laundering and the financing of terrorism effectively. Customer Due Diligence should be applied upon the establishment of a business relationship. Enhanced Due Diligence should also be applied where there is a receipt of a significant cash amount above normal threshold receipts. Customer Due Diligence measures should also be applied whenever financial institutions suspect money laundering or terrorist financing activities.

The Legal Framework for Customer Due Diligence in Kenya.

In Kenya, CDD is a legal requirement under the Proceeds of Crime and Anti-money Laundering Regulations, 2013. Under the regulations, reporting institutions which include banks, insurance companies, and microfinance institutions must undertake due diligence procedures before establishing a business relationship.

Specifically, institutions are required to identify customers using independent source documents, data, or information, verify the identity of beneficial owners and conduct ongoing due diligence on the business relationship to ensure that transactions being undertaken are consistent with the financial institution’s knowledge of the customer, their business and risk profile.

Importance of Customer Due Diligence for Financial Institutions in Kenya

One of the key benefits of conducting customer due diligence is the protection of the institution against reputational risk. Another benefit is the maintenance of customer trust. Lastly, CDD ensures the avoidance of regulatory fines and penalties. In Kenya, a reporting institution that contravenes the provisions of the regulations commits an offence and is liable to a fine not exceeding five million Kenya shillings or imprisonment for a term not exceeding three years or both.

Riskhouse International Limited assists organizations to examine the effectiveness of their Anti-money laundering and Combating Financial Terrorism programs by offering AML/CFT Health Checks, KYC Diligence, Screening, and Remediation, AML/CFT Analytics, Monitoring, and Investigation, and AML/CFT Training and Awareness.

To learn more about this and to catch up on our other news and alerts you can visit our blog on our website at https://riskhouse.co.ke/blog/

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Fraud risk assessment is a component of fraud risk management strategy that helps an organization and its stakeholders protect itself against fraud. It is a technique by management to detect and understand their fraud exposure, fraud risks, and the efficiency of existing anti-fraud controls and solutions.

Fraud risk assessment involves a comprehensive examination of fraud vulnerabilities, control environment evaluation, determining the likelihood of fraud risk, identifying material gaps, remediation, regular revalidation, and control implementation approval.

The objective of the risk assessment process is to evaluate hazards and, if required, mitigate them by improving control measures. The four primary aspects of fraud risk assessment are:

• Asset Misappropriation,which evaluates the indicators of missing cash, inventories, and other assets
• Non-financial and financial reporting,which evaluates inconsistencies that can indicate fraud in financial and non-financial reporting
• Illegal actions,which evaluate any fraudulent activities within an organization’s operation
• Regulatory compliance,which evaluates compliance with industry regulations and the organization’s efforts to meet regulatory standards.

A fraud risk assessment is critical in assisting organizations to proactively identify external and internal risks that can damage their reputation and assets and expose them to criminal or civil liability.

As a result, Riskhouse International can assist your organization in implementing a rigorous fraud risk assessment methodology that includes fraud risk identification and documentation, fraud risk analysis, fraud risk evaluation, and fraud risk treatment. Fraud risk assessment quantifies risks and allows your organization to prioritize more damaging frauds. Riskhouse will adapt a fraud risk-tolerance limit to your organization’s needs based on the results of the fraud risk assessment.

To learn more about this and to catch up on our other news and alerts you can visit our blog on our website at https://riskhouse.co.ke/blog/.

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Introduction

In simple terms, asset tracing is the process of identifying assets through investigations for a particular purpose [without going into the details to answer questions as to who has a legal right to the assets so traced]. Asset tracing can be distinguished from asset recovery which involves the restraining, seizure, confiscating, and return of the assets traced to the rightful owner; it is an assertion of a right.

The nexus between tracing and recovery is that once the tracing exercise is successfully completed, it can then be asked what rights, if any, the claimant can, on his particular facts, assert against the assets traced. These rights can be personal, proprietary, legal, and other equitable rights depending on the subsisting facts.

According to Lord Millett in Foskett v. McKeown and Others, tracing assets is neither a claim nor a remedy. It is merely the process by which a claimant demonstrates what has happened to his property, identifies its proceeds and the persons who have handled or received them, and justifies his claim that the proceeds can properly be regarded as representing his property.

Tracing is also distinct from claiming in the following ways: –

1. It identifies the traceable proceeds of the claimant’s property.
2. It enables the claimant to substitute the traceable proceeds for the original asset as the subject matter of his claim, but it does not affect or establish his claim.

When and why Asset tracing should be used?

The process of asset tracing and recovery is crucial for the successful recovery of misappropriated assets, recovering proceeds of fraud and embezzlement. It is also through asset tracing and identification that financiers can carry out proper due diligence in respect of assets they intend to take as security and investors can access the legitimacy of assets and ventures, they intend to invest in. Additionally, asset tracing and identification is crucial in family law proceedings including succession and divorce as we shall be further discussing in our subsequent articles on this area.

Asset tracing and recovery is also an important tool for creditors as it allows those who are considering instituting claims in court to ascertain unencumbered assets and obtain preservation orders against them to aid in recovery; it also aids in the enforcement of court decrees and judgments which would otherwise be hindered by lack of knowledge of the judgment debtor’s assets.

Asset Tracing in Corporate Insolvency Litigation

In insolvency-related matters, asset tracing is also crucial in the tracing and recovery of property that may have been misappropriated by the directors of the company. Case in point:- in liquidation matters, the insolvency practitioner may need to trace misappropriated assets in the event that he intends to pursue the directors for an offence of fraudulent trading or seek orders against delinquent directors as contemplated in our insolvency laws.

Where specific misappropriated assets can be identified, the liquidator can follow the trail and obtain freezing orders or injunctions and disclosure orders on behalf of the Company in liquidation to prevent the delinquent directors from dissipating the assets as to have the effect of prejudicing the interests of the entire body of creditors.

The liquidator, the official receiver, or the creditor can also invoke the power of the Insolvency Court under Section 504 of the Insolvency Act to undertake an examination into the conduct of the person in relation to whom the application was made. Where the Court finds that the person has misappropriated the company’s assets, the Court may make orders compelling the person: –

1. to repay, restore or account for the money or property or any part of it, with interest at such rate as the Court considers appropriate; or
2. to contribute such amount to the company’s assets as compensation for the misfeasance, breach of fiduciary or other duty as the Court considers fair and reasonable.

How can we help?

At Riskhouse, we combine our skills in forensic accounting, forensic investigations, financial & intelligence analysis, understanding of the insolvency process, and digital investigations to perform complex analyses and identify and trace assets of the relevant subjects to satisfy our clients’ needs including; due diligence, recovery of debts and/or proceeds of fraud, enforcement of legal orders,  identification of assets for distribution in family law proceedings, money laundering, resolution of disputes and assessment of cost-benefit of instituting debt recovery claim. With our support, our clients can identify and also assume control of available assets subject to the subsisting contractual relationship with the relevant subject.

To learn more about this and to catch up on our other news and alerts you can visit our blog on our website at https://riskhouse.co.ke/blog/.

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