September 29, 2023 Kenya's new anti-money laundering law adds compliance obligations for companies, branches, limited liability partnerships and foreign LLPs
Executive summary Kenya enacted an omnibus Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2023 (the Act) on 1 September 2023. Effective on 15 September 2023, this new omnibus law amends various laws and buttresses the fight against money laundering and terrorism financing in Kenya. The law's new obligations for companies, branches, limited liability partnerships (LLPs) and foreign LLPs are the focus of this Global Tax Alert. Changes made in the Act The Act provides extensively for beneficial-ownership disclosures for local and foreign companies and LLPs. The new law also introduces certain fundamental definitions from the Companies Act, 2015, including a "nominator" — an individual or legal person who issues instructions directly or indirectly to a nominee to act on their behalf in the capacity of a shareholder or director. A "nominee" is in turn defined as an individual or legal person instructed by a nominator to act on their behalf. Further, the law incorporates some important definitions from the Limited Liability Partnership Act, 2011, including the definition of a "beneficial owner" under the Companies Act (i.e., a natural person who ultimately owns or controls a legal person or arrangement or on whose behalf a transaction is conducted). The new law also defines a "nominee partner" as an individual or legal person instructed by the nominator to act on their behalf in a certain capacity regarding an LLP. The Act now mandates existing entities and persons registering companies and LLPs, both local and foreign, to maintain and lodge a copy of the (i) register of beneficial owners, (ii) register of nominee directors (for companies) and (iii) register of nominee partners (for LLPs) with the Registrar as part of the preregistration documentation. Existing companies and LLPs are required to lodge these documents with the Registrar within 60 days of the Act's coming into force (i.e., by 15 November 2023) with an option of applying for an additional 30-day extension. If any of these documents is amended, the Registrar must be notified within 14 days. Moreover, if a person ceases to be a beneficial owner, the company or LLP must maintain the records pertaining to that person for another 10 years. Failure to comply with the requirement to disclose beneficial owners could lead to a company or LLP to being struck off the register by the Registrar. The entities and officers involved could also be exposed to various administrative penalties for noncompliance. The Act also gives private companies with a paid-up capital of less than KES1 5,000,000, and companies limited by guarantee, the discretion to appoint a company secretary. If these entities do not appoint either a company secretary or a resident director, they are now required to appoint a contact person who is a natural person with a permanent residence in Kenya. Companies incorporated before this legislation came into force are now required to lodge a notice of appointment within 60 days of the Act's coming-into-force date (i.e., 15th November 2023). As a result, fully foreign-owned companies with nonresident shareholders and directors will be required to appoint local representatives or company secretaries for their entities before 15 November 2023. Further, foreign LLPs that intend to carry on businesses in Kenya are now required to be registered under the Limited Liability Partnerships Act and have a local registered office in Kenya. They must also appoint at least one local representative who resides permanently in Kenya or a Kenyan citizen who ordinarily resides in Kenya. Implications In view of the above, businesses should thoroughly review their current ownership and control structures, identify their beneficial owners and nominee arrangements, and update the information in their records accordingly to ensure compliance within the deadlines stipulated. Although these changes carry an increased compliance burden on the entities affected, they are a welcome development as they should ensure greater transparency and accountability among legal entities in the country. ——————————————— For additional information with respect to this Alert, please contact the following: Ernst & Young (Kenya), Nairobi
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor ——————————————— ENDNOTE 1 KES refers to the Kenyan shilling. | ||||
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