Pezesha Africa Anti-Money Laundering (AML) Agreement
Pezesha Africa Anti-Money Laundering (AML) Program: Compliance and Supervisory Procedures
Written as of October 29, 2020
Money laundering in its simplest form is the process by which illegally obtained money (from drug trafficking, terrorist activity or other serious crimes) is given the appearance of having originated from a legitimate source. We, as Pezesha Africa Limited, endeavour to recognise money laundering and follow our procedure to minimise the risk.
What is Money Laundering ?
Money laundering is not a single act but it is a process that is accomplished in three basic steps. The steps being:
The common factors identified in laundering operations are the need to:
1. Conceal the origin and the true ownership of the funds
2. Maintain control of the funds
3. Change the form of the funds in order to shrink them from the initial large volume of cash generated by the initial criminal activity.
1. Placement : This is the first stage of the process and usually involves the placing of large sums of cash into the financial system, the retail economy or out of the country. The aim is to remove the cash from the location of acquisition to avoid detection by the authorities and to transform it into other assets such as buying high value goods, property or business assets.
2. Layering : This is the attempt at concealing or disguising the source of the funds by creating complex layers of financial transactions designed to disguise the audit trail. Its aim is to disassociate the illegal monies from the source of the crime by creating a complex web of financial transactions aimed at concealing the source and ownership of the funds example wire transfers abroad often using shell companies or funds disguised as proceeds of legitimate business, cash deposited in overseas banking system and the resale of goods/assets.
3. Integration : This final stage is when the money is integrated into the legitimate economic and financial system. This integration is accomplished by the launderer making it appear that the money has been legally earned example false loan repayments or forged invoices, complex web of transfers both domestic and international, so that tracing of original sources is almost impossible and income from property or legitimate business assets appears clean.
The Most Popular Methods of Money Laundering have been listed as including 1. The establishment of anonymous companies in countries where the right to secrecy is guaranteed. The criminal elements will then grant themselves loans from the laundered money in the course of a future legal transaction, and to increase legality, they also claim tax relief on the loan repayments.
2. The sending of false export-import invoices overvaluing the goods allows money to be moved from one company to another and one country to another therefore verifying the origin of the funds placed with a financial institution.
3. Abortive transactions or other means of getting money unnecessarily into the hands of reputable organisations so that when it is returned to the payer it assumes an air of respectability.
The Republic of Kenya has established the guiding legal framework in the form of the Proceeds of Crime and Anti-Money Laundering Act, 2009, the Proceeds of Crime and Anti Money Laundering Regulations, 2013 and the Guidelines on the Prevention of Money Laundering in the Capital Markets.
The aim of this legal framework is to provide for the offence of money laundering and to introduce measures for combating the offence, to provide for the identification, tracing, freezing, seizure and confiscation of the proceeds of crime, and for connected purposes.
The strategy is to detect, disrupt and deter crime and terrorism through a range of strategies including measures to restrict criminal access to the financial system. We as Pezesha understand that it is an offence to knowingly transact with an investor’s funds or property knowing fully well that the funds or property are proceeds of crime. Similarly, attempting to disguise the source or nature of proceeds of crime is an offence.
The Regulations require companies to put preventative measures in place. This requires them to ensure that they know their clients (including conducting customer identification and verification and undertaking monitoring where applicable), keep records of identity and to train staff on the requirements of the law.
There are five basic money laundering offences which are explained in more detail below:
1. Assisting another to retain the benefit of crime;
2. Acquiring, possessing or using of criminal proceeds;
3. Concealing or transferring proceeds to avoid prosecution or a confiscation order;
4. Failing to disclose knowledge or suspicion of money laundering;
5. Tipping off.
1. Assisting another to retain the benefit of crime
Assistance occurs where a person is knowingly involved in an arrangement with another person and they know or suspect that the other person is or has been involved in or benefited from criminal activities, and the arrangement helps the person to retain or control directly or indirectly or enables them to use the proceeds or to invest them for his/her benefit.
2. Acquiring, possessing or using of criminal proceeds
Acquisition is the offence of use or possession of property which you know or suspect to be gained by the proceeds of criminal activities and that have been acquired at less than full value. The aim of this offence is to try and prevent criminal proceeds being passed on by criminals to be enjoyed by a third party.
3. Concealing or transferring proceeds to avoid prosecution or a confiscation order Concealing is disguising, removing or transferring proceeds of crimes either directly or indirectly for the purpose of avoiding or helping someone else avoid prosecution. The offence is committed by the person who assisted in the offence if he or she knows or suspects the nature of the property. Concealing or disguising any property includes concealing or disguising its nature, source, location, disposition, movement or ownership or any rights with respect to it.
4. Failing to disclose knowledge or suspicion of money laundering :
A person is guilty of an offence if as a result of something he/she learns in the course of trade, profession or employment he/she does not report the suspicion to the Financial Reporting Center.
5. Tipping Off :
The requirement to report suspicions is not much use if the suspect is tipped off to the fact that they are under suspicion/investigation. In order to preserve the integrity of an investigation, the offence occurs when information or any other matter which might damage the investigation is disclosed to the suspect by someone who knows or suspects that an investigation is under way or about to start.
Duties A reporting institution
According to the Proceeds of Crime and Anti-Money Laundering Act (Pro CAMLA), a Reporting Institution such as Pezesha is required to implement policies and procedures for:
1. Customer due diligence and ongoing monitoring
2. Reporting Procedures
3. Internal Control
4. Risk assessment and management
5. Staff Training
1. Customer Due Diligence
Identify your client and your client’s business by means of documents, data or information obtained from a reliable and independent source.
As Pezesha, we have taken reasonable measures to satisfy ourselves as to the true identity of any applicant seeking to enter into a business relationship with us or to carry out a transaction or series of transactions with us, by requiring the applicant to produce an official record reasonably capable of establishing their true identity, such as—
(a) in the case of an individual—
(i) Full name of the individual.
(ii) A birth certificate.
(iii) A national identity card.
(iv) A driver’s licence.
(v) A passport.
(vi) Any other official means of identification that clearly identifies the person. (vii) postal address;
(viii) current physical or residential address;
(ix) utility bill including among others an electricity or a water bill;
(x) occupation or employment details;
(xi) source of income;
(xii) nature and location of business activity;
(xiii) income tax personal identification number (PIN) issued by Kenya Revenue Authority if such a number has been issued to the customer;
(xiv) where applicable, written references from acknowledged persons attesting to the customer’s identity; and
(xv) for accounts with more than one party and where one of the parties has identified the others, written confirmation shall be obtained to the effect that the first party has known the other(s) personally for at least twelve months.
(b) Where dealing with a body corporate, Pezesha shall seek to obtain one or more of the following documents:
(i) its registered name;
(ii) evidence of registration or incorporation such as a certified copy of Certificate of Registration or Certificate of Incorporation, or Memorandum and Articles of Association or other similar documentation evidencing the legal status of the legal person or body corporate;
(iii) certified copy of board resolution stating authority to open an account or transact business with the reporting institution, and designating persons having signatory authority thereof;
(iv) the full names, date of birth, identity or passport number and address of the natural persons managing, controlling or owning the body corporate or legal entity;
(v) for corporate bodies, audited financial statements for the last full year; (vi) for sole traders, un-audited financial statements for the last full year: (vii) Kindly note that an exemption may be considered for a new sole proprietorship business in the production of audited accounts or un-audited accounts if there exists practical difficulties in obtaining financial statements from it;
(viii) Personal identification number (PIN); or
(ix) Where applicable, written confirmation from the customer’s prior bank, if any, attesting to customer’s identity and history of account relationship.
(c) When dealing with Partnerships Pezesha shall obtain the following details: (i) the name of the partnership or where applicable its registered name; (ii) the Partnership Deed;
(iii) its registered address or principal place of business or office;
(iv) its registration number;
(v) the full names, date of birth, identity card number or passport number and address of every partner;
(vi) the person who exercises executive control over the partnership; (vii) the name and particulars of each natural person who purports to be authorized to establish a business relationship or to enter into a transaction with the reporting institution on behalf of the partnership; or
(viii) un-audited financial statements for the last full year.
(d) When dealing with Trusts, Pezesha shall obtain the following details:
(i) its registered name, if any;
(ii) its registration number, if any;
(iii) evidence of registration or incorporation such as a Certificate of Incorporation or registration;
(iv) trust deed;
(v) formative document such as partnership agreement, memorandum and articles of association;
(vi) official returns showing registered office and if different the principal place of business;
(vii) full names and details of the management company of the trust or legal arrangement, if any;
(viii) names of the relevant persons having senior management position in the legal person or trustees of the legal arrangement;
(ix) full names of the trustee, beneficiaries or any other natural person exercising ultimate effective control over the trust;
(x) full names of the founder of the trust;
(xi) any other documentation from a reliable independent source proving the name, form and current existence of the customer; and
Pezesha shall also be required to satisfy itself as to whether an investor or even a borrower is seeking Pezesha’s services in the investor or borrower’s individual capacity or that of a third party and where this is the case, Pezesha must seek to identify the third party.
2. Reporting Procedures
Where any employee within Pezesha suspects that a client is involved in any activity that amounts to money laundering, they must inform the Compliance Officer immediately. If an employee feels suspicious after a transaction has taken place, one must inform the Compliance Officer immediately. One must ensure that this is done without ‘tipping off’ the client.
3. Internal Control
All staff must follow guidelines in terms of documentation for identifying clients and businesses. They must also report any suspicious transaction to the Compliance Officer for the relevant report to be completed and filed with the relevant authorities but it is important that they do not make the client aware of this.
4. Risk Assessment and Management
All files are reviewed by Compliance Officer to ensure that all documentation is compliant, and when any changes happen, Pezesha shall get legal advice to ensure that we are compliant. We are also subject to an annual external audit by our External Auditors who undertake random checks on client loan balance and ensure files and debt procedures are up to date. If anything were to be found at these audits this would be reported to the Compliance Officer who would complete the appropriate report to the appropriate authorities.
5. Staff Training
On a yearly basis, all staff will undertake the reading of the Money Laundering policy. Further to this, any changes made to the Act will be immediately informed to staff via training days and the policy will be updated with these changes and signed off by the Board of Directors.