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Cablegate: Kenya: Anti-Money Laundering Bill Moves Forward

VZCZCXYZ0005
PP RUEHWEB

DE RUEHNR #1272/01 1400542
ZNR UUUUU ZZH
P 190542Z MAY 08
FM AMEMBASSY NAIROBI
TO RUEHC/SECSTATE WASHDC PRIORITY 5812
INFO RUEHXR/RWANDA COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEAHLC/HOMELAND SECURITY CENTER WASHDC
RUEHPS/USMISSION OECD PARIS FR

UNCLAS NAIROBI 001272

SENSITIVE

DEPT FOR AF/E, AF/RSA, AF/EPS, INL/C, AND EEB/ESC/TFS
JUSTICE FOR AFMLS, OIA, AND OPDAT
TREASURY FOR FINCEN
TREASURY FOR DAN PETERS

SIPDIS

E.O. 12958: N/A
TAGS: PTER KCRM KTFN ECON EFIN KE
SUBJECT: KENYA: ANTI-MONEY LAUNDERING BILL MOVES FORWARD

REFS: A) NAIROBI 1088, B) NAIROBI 1019

SENSITIVE BUT UNCLASSIFIED; FOR USG USE ONLY.

1. (SBU) Summary: The Proceeds of Crime and Anti-Money Laundering
bill survived its second reading in Kenya's Parliament on May 8.
Despite criticism from some MPs, the bill was sent to two committees
for review, amendment and decision. The GOK's interagency
Anti-Money Laundering Task Force is optimistic (again) that
Parliament will eventually pass the bill, but fears it will not pass
before the August 17-23 plenary meeting of the Eastern and Southern
African Anti-Money Laundering Group (ESAAMLG), which will be held in
Nairobi. Members of the new Muslim Caucus will almost certainly
demand that the bill be watered down or killed. The Task Force
welcomed the Ambassador's advocacy for the AML bill with President
Kibaki and Prime Minister Odinga, but asked that USG support be kept
discreet. End summary.

GOK Legislative Strategy
------------------------
2. (SBU) Emboffs met with the GOK's interagency Anti-Money
Laundering (AML) Task Force on May 13 to discuss the status of the
AML bill and the GOK's strategy for passage (ref A). Task force
members felt the May 8 session, in which the AML bill survived its
second reading unscathed and was sent to both the Finance, Planning
and Trade, and the Administration of Justice and Legal Affairs
Committees for review and comment, showed general support from MPs.
The GOK would have to educate Parliament (again) through the usual
workshops about money laundering and the bill to allay MPs'
apprehensions about some provisions, but the two Committees may
still propose amendments. The GOK will continue to emphasize the
AML bill as anti-crime to distinguish it from previous
anti-terrorism bills, and show it is not something being forced on
Kenya by foreign powers as a condition for donor assistance or aimed
at any religious group. The Task Force has not received any donor
funding yet for the next round of workshops to brief MPs on the
bill. If it needs USG support, Task Force would prefer the funding
for be provided discreetly to avoid any public linkage. Comment: We
believe this is feasible via USAID's existing Parliamentary
Strengthening program. End comment.

3. (SBU) The Task Force said the AML bill has a very broad
definition of predicate offences, but the Organized Crime bill would
also have to be passed to address some specific counter-terrorism
cases. The Office of the President and the Attorney General are
amending the Crime bill to address the comments Parliament made last
year. It is on the GOK's legislative agenda, but the Task Force
would prefer to see the AML bill pass before the GOK introduces the
Organized Crime bill to keep them separate in peoples' minds.

4. (SBU) The Task Force noted that MPs Chris Okemo, Musikari Kombo,
Lukas Chepkitony, and Jakoyo Midiwo on the Finance Committee had
supported the bill in previous years and would likely do so again.
They thought Eugene Wamalwa and Millie Odihambo were likely
supporters on the Legal Affairs Committee, but that Abdikadir
Mohammed and Amina Abdalla had stated their opposition. The Task
Force had hoped Parliament would pass the bill before the August
17-23 plenary meeting of the Financial Action Task Force (FATF)
Eastern and Southern African Anti-Money Laundering Group (ESAAMLG),
which will be held in Nairobi. However, they did not appear
optimistic the bill would be passed before the GOK presents its
2008-09 budget to Parliament in mid to late June, on which the MPs
will likely focus until the August recess. If so, the AML bill
couldn't be passed until the October-November session at the earliest.

Senior GOK Officials Express Strong Support for AML Bill
--------------------------------------------- ----------
5. (U) Finance Minister Kimunya moved the AML bill in Parliament on
May 8 for its second reading, addressing the various
counter-arguments that have been previously advanced. He defined it
as an anti-crime bill important to protecting Kenya from a wide
variety of crimes. He linked laundering with corruption and said
they both deter investment and fuel organized crime. He mentioned
the Goldenberg scandal of the 1990s and the pyramid scams in which
thousands of investors lost millions of shillings in 2007 as
examples of the damage money laundering could do to Kenya. Kimunya
warned that laundered funds are unreliable "hot" money whose
unpredictable movement could destabilize the economy, rather than
stable investment that fosters economic growth. He noted the UN
Convention Against Transnational Organized Crime and the Financial
Action Task Force (FATF) as Kenyan commitments and the basis for the
bill. He also described FATF's nine additional recommendations to
combat financing of terrorism and said the bill would help protect
Kenya from further terrorist attacks. He assured the MPs the bill
meets global standards and best practices. After listening to the
comments from other MPs, Kimunya defended the bill as a "homegrown"
solution to a Kenyan problem that was in Kenya's best interests, not
a condition from development partners. He assured the MPs the bill
was based on international conventions, not a copy of an American
law, and it targeted crime, not any religious group.

6. (U) In the debate, the Minister for Special Programs, Dr. Naomi
Shaban and the Assistant Minister for Environment and Mineral
Resources Ramadhan Kajembe stated their support for the bill.
Finance Committee member Chris Okemo welcomed the bill as necessary
because money laundering is being done in Kenya by the "big fish."
Finance Committee Member Ntoithia M'Mithiaru said the bill would
bring Kenya into compliance with UN Conventions and the Basle Accord.
MP Eugene Wamalwa of the Legal Affairs Committee also spoke in favor.

Some MPs Opposed the Bill, Seek to Amend in Committee
--------------------------------------------- --------
7. (U) MP Abdikadir Mohammed from the Legal Affairs Committee spoke
at length, opposing the bill as a reincarnation of the previous
Anti-Terrorism bill based on the dreaded Patriot Act of the U.S.A.,
not on FATF recommendations. He said the bill authorized
unconstitutional expropriation of rightful property. He claimed the
bill was inconsistent with the 1998 U.S. Supreme Court decision in
favor of a Mr. Bajakajian that forfeiture of the entire $367,000
that he had failed to declare to Customs was an excessive fine. He
noted the bill was designed for an economy with a developed, widely
used financial system, not Kenya's undeveloped cash economy, and
would raise transaction costs.

8. (U) MP Aden Barre Duale, the whip of the new Muslim caucus, said
the AML bill threatened Kenyans' property and human rights, and
would be used to target Islamic charities and NGOs. He called for a
bill that "governs" proceeds from drugs, prostitution, money
laundering and terrorism, but not this bill.

Comment
-------
9. (SBU) The AML Task Force has been over-optimistic about the AML
bill's passage before, but we hope the upcoming August 17-23 ESAAMLG
plenary in Nairobi, at which Kenya is supposed be elected Chairman
for a year, will provide the necessary deadline or impetus for
action. The newly-formed Muslim caucus in parliament (Ref B) may
try to kill the bill unless the GOK allays its fears of unfair
targeting by convincing it the safeguards against abuse are
sufficient, amending the bill to strengthen the safeguards, or
weakening the enforcement powers given to the government. Post has
kept the AML bill near the top of our legislative agenda, and the
Ambassador has advocated strongly for its passage with President
Kibaki and PM Odinga. Through existing USAID programs, we will also
be looking at ways we can discreetly offer the Committees technical
assistance to support the Task Force efforts to educate the new
slate of MPs on the virtues of the legislation.

RANNEBERGER

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