AML & Sanctions Compliance for Kenya's Real Estate Sector

When criminals use property to launder money, it can:

• Artificially inflate property prices, making housing less affordable for ordinary citizens and legitimate investors. [5]
• Undermine economic development by funding criminal enterprises and corruption.
• Damage Kenya's international reputation, potentially leading to the country being 'grey-listed' by bodies like the FATF, which can make international trade and finance more difficult for everyone. [4]

Failure to comply with POCAMLA can have severe consequences, including:

• Heavy Fines: The Financial Reporting Centre (FRC) has the authority to impose significant financial penalties on non-compliant agencies. [7]
• Imprisonment: Individuals, not just companies, can be held liable for serious breaches. [7]
• Reputational Damage: Being associated with a money laundering scandal can destroy your clients' trust and your business's future.

As a reporting institution, you MUST:

1. Register with the FRC: Your agency must be registered with the Financial Reporting Centre.
2. Conduct Customer Due Diligence (CDD): You must verify the identity of your clients and understand the source of their funds. [4]
3. Keep Records: All transaction and customer identification records must be kept for at least seven years.
4. Report Suspicious Transactions (STRs): You have a duty to file a report with the FRC for any transaction you deem suspicious, regardless of the amount. [4]
5. Implement an AML/CFT Program: Your agency must have internal policies, controls, and procedures to prevent and detect money laundering. [2]
6. Appoint a Money Laundering Reporting Officer (MLRO): You must designate a senior person responsible for overseeing AML compliance and reporting to the FRC.

This critical update directly impacts your business. The key changes include:

• Increased Penalties: The fines and potential prison sentences for non-compliance by Designated Non-Financial Businesses and Professions (DNFBPs), including real estate agents, have been significantly increased.
• Stricter Oversight: The Estate Agents Registration Board is now empowered with greater supervisory authority to enforce compliance under the guidance of the FRC. [4]
• Emphasis on Proliferation Financing: The law now includes a focus on countering the financing of the proliferation of weapons of mass destruction, a key international standard. [4]

The message from the government is clear: compliance is not negotiable.

Identification Data to Collect:

• Full Name
• Date of Birth
• Nationality
• Physical Address
• KRA PIN

Verification Documents:

• Primary: Original National ID Card (or Passport for foreigners). Always see the original.
• Supporting: A recent utility bill or bank statement to verify address.

Key Documents to Obtain:

• Certificate of Incorporation: Proves the company exists legally.
• CR12 Form: This is a critical document from the Business Registration Service (BRS) that lists the current directors and shareholders.
• KRA PIN Certificate of the Company.
• IDs and KRA PINs of all Directors and Ultimate Beneficial Owners (UBOs) - anyone who owns or controls 10% or more of the company.

You must understand the company's structure to identify the real people who own and control it.

Source of Funds (SOF): This refers to the origin of the specific funds being used for the transaction. Where is the money for *this particular property purchase* coming from? (e.g., "Sale of a previous property," "Bank loan from ABC Bank," "Business revenues"). You need to see proof, like a sale agreement or loan document.

Source of Wealth (SOW): This refers to the origin of the client's total economic wealth. How did they accumulate their net worth? (e.g., "Inheritance," "Founder of a successful logistics company," "Career as a surgeon"). For high-risk clients, you must have a clear understanding of their SOW.

• The Consolidated United Nations Security Council Sanctions List: This is mandatory for all UN member states, including Kenya.
• Kenya's National Sanctions List: Issued under the Prevention of Terrorism Act (POTA), this list contains domestic terrorism-related designations.
• International Best Practice (OFAC, UK, EU): While not Kenyan law, screening against lists from the US (OFAC), UK, and EU is highly recommended. A transaction with a person on these lists could expose your agency and Kenya's financial system to severe risk if it involves international correspondent banks.

Screening:

Use the free, official online search tools for the UN and OFAC lists. Screen the names of your client, the beneficial owners, and any other key parties to the transaction. Always save a screenshot of your search result (even if it's "no match") as evidence of your due diligence.

If You Get a Potential Match:

1. Freeze: Immediately pause the transaction. Do not proceed any further.
2. Block & Don't Tip Off: Do not inform the client that they may be on a sanctions list. This is a criminal offense known as "tipping off".
3. Report: Immediately report your findings internally to your MLRO, who must then urgently report it to the FRC and other relevant authorities as per Kenyan law.

• Unusual Payment Methods: Client wishes to pay a significant portion in physical cash; use of multiple bank accounts or third-party accounts for no logical reason.
• Client Secrecy: Client is reluctant to provide CDD documents, is evasive about their source of funds, or uses an overly complex and opaque corporate structure (e.g., shell companies, nominee directors).
• Transaction Structure: The property is quickly resold ("flipped") for no apparent commercial reason; significant over- or under-valuation of the property compared to market rates.
• Client Behaviour: The client shows little interest in the property itself but is very interested in the transaction details; the client is a Politically Exposed Person (PEP) whose wealth doesn't seem to align with their known salary.

You must report your suspicion to your agency's Money Laundering Reporting Officer (MLRO). The MLRO will then assess the situation and, if they agree, will file a Suspicious Transaction Report (STR) with the FRC, typically through their 'goAML' online portal. [4, 6]

Key elements of a good STR include:

• Who: Details of the client and any other parties involved.
• What: Details of the property transaction.
• When: The dates of the suspicious activity.
• Why: A clear and concise explanation of *why* you are suspicious. What were the red flags you observed?

Remember: Your job is to report suspicion, not to prove a crime. Let the FRC investigate.

1. AML/CFT Policy Document: A written document approved by senior management that outlines your agency's commitment to compliance.
2. Risk Assessment: A documented assessment of your agency's specific exposure to money laundering risk (e.g., types of clients, properties, geographic locations).
3. Customer Due Diligence Procedures: A clear, step-by-step guide on how your staff will onboard and verify new clients.
4. Reporting Procedures: A clear process for staff to report suspicions internally to the MLRO, and for the MLRO to report to the FRC.
5. Record Keeping Policy: Instructions on what records to keep, how to store them securely, and for how long (at least 7 years).
6. Staff Training Program: A plan for initial and ongoing training for all relevant staff.

This designated individual is responsible for:

• Being the main point of contact with the FRC.
• Receiving and assessing internal suspicious activity reports from staff.
• Making the final decision on whether to file an STR with the FRC.
• Overseeing the development and maintenance of the AML program.
• Ensuring that staff receive appropriate AML training.

This is a senior role with significant responsibility.