SANCTIONS AS A TOOL FOR ASSET RECOVERY: KENYA CIFAR RESEARCH PAPER CIFAR.EU KEY MESSAGES • Kenya has been relatively successful in recent years in concluding modest asset recovery agreements and has shifted its strategy from purely pursuing corruption prosecutions and convictions to also tracing and locating the proceeds of corruption. • The UK, the EU and the US have sanctioned several Kenyan nationals and residents of Kenya on the grounds of support for terrorism and corrupt conduct. • Sanctions imposed by other countries have though been portrayed within Kenya as politically motivated and designed to preserve geopolitical or business advantage. • The use of Magnitsky-style, ‘smart’ sanctions may present some advantages and opportunities in Kenya, especially in tackling past cases. • Care needs to be taken when imposing these international sanctions that they address primarily cases where national progress is stalled. Extensive communication with a wide range of Kenyan stakeholders during the process is recommended. Paper prepared by Mr. Vaclav Prusa for the Civil Forum for Asset Recovery e.V. (CiFAR). The author has made reasonable steps to ensure that the content is accurate. The views, opinions and evidence presented in this paper are the sole responsibility of the author. Published: 2020, CiFAR – Civil Forum for Asset Recovery e.V. CiFAR – Civil Forum for Asset Recovery e.V. Köpenicker Str. 147, Berlin, Germany, cifar.eu Cover picture: provided by Pixabay through a Pixabay Licence for free commercial usage without attribution.. 1 ASSET RECOVERY AND ANTI-CORRUPTION FRAMEWORK decisively contributed to the effectivity and CORRUPTION OVERVIEW effectiveness of the institution.4 Kenya remains a high-risk country for THE KENYAN PUBLIC IS IN GENERAL HIGHLY corruption at all levels. The East African SCEPTICAL OF GOVERNMENTAL ANTI- country is a regional economic hub and CORRUPTION EFFORTS. THE PUBLIC a financial centre. It nevertheless ranks as RANKS LAW ENFORCEMENT AND THE the ninth riskiest destination for money POLICE AS THE MOST CORRUPT KENYAN laundering in the world, according to the INSTITUTIONS.5 2020 Basel Anti-Money Laundering Index. High levels of illicit financial outflows Publications have highlighted the and assets laundered through illegal kleptocratic nature of corruption in Kenya activity in the region are enabled by weak and the difficulties in reforming a deeply compliance with existing Anti-Money corrupt system, with aspects of public Laundering/Combating the Financing service based on ‘prebendalism’ where of Terrorism (AML/CFT) legislation and elected and public officials perceive it as 1 policies. Kenya is categorised by the US State their right and duty to share government Department as a jurisdiction of primary revenues and use them to benefit their concern in respect to AML/CFT, due to the supporters and members of their ethnic 2 potential for terrorism financing. group.6 A report conducted by the African branch of the Open Society Foundation Despite obvious governance weaknesses, echoes the majority public opinion of Kenya has been praised by the international Kenyans that “[p]revention, suppression and community and, to some extent, Kenyans, punishment of corruption frequently feature as an anti-corruption reformer in recent in Kenyan political rhetoric, but rarely is this years. The third FATF review in 2014 noted rhetoric matched by action”.7 Kenya’s significant progress in improving 3 its AML/CFT regime. Under President Kenya has a well-developed and Kenyatta, the justice sector, considered independent media. Kenyan media and corrupt and inefficient in the past, is being civil society are instrumental in reporting rapidly transformed. The institutional and investigating corruption cases and and legal anti-corruption framework is are well linked with global investigative relatively well developed. The Ethics and organisations and other foreign partners. Anti-Corruption Commission (EACC) is Investigative journalists frequently disclose the leading anti-corruption agency; it was crucial anti-corruption evidence despite established in 2011 and is enshrined in the some restrictive laws. Defamation charges Constitution. Despite consistent attacks on against domestic media outlets and physical its operational independence and integrity attacks related to their anti-corruption work and numerous destabilisation attempts, the do, however, occur.8 EACC is one of the most respected African anti-corruption institutions. The government does not maintain a list of sanctioned individuals or entities. There are Unlike most other countries in the sub- no international sanctions against Kenya. Saharan region, Kenya guarantees the There are several individuals and entities on commissioners of the EACC security of the US Specially Designated Nationals and tenure at a constitutional level, which has Blocked Persons list (SDN List) and sanctions CIFAR.EU [email protected] PB 2 lists of other nations.9 intense pressure from Kenyan civil society,15 the National Treasury has proposed Proceeds of Crime and Anti-Money Laundering ASSET RECOVERY OVERVIEW Regulations (2019), seeking to establish a Criminal Assets Recovery Fund and The EACC and other law enforcement Administration. If enacted in its current form, have relative operational independence the fund will receive, manage, and transfer despite occasional political interference all money and property derived from and insufficient budget independence.10 confiscation and forfeiture orders recovered Compared regionally, the EACC has a under the Anti-Corruption and Economic track record of reliable performance in the Crimes Act.16 This legal framework would investigation and conviction of corruption- address concerns of civil society and the related cases. For example, in 2018/19, 130 public that assets returned from abroad cases were completed with 48 convictions and domestically may not be being utilised secured. 1748 active investigations took place appropriately.17 during the same period.11 In 2014 Kenya’s National Assembly passed The EACC has also been progressing in the Proceeds of Crime and Anti-Money the field of asset recovery. Between 2011- Laundering Act (POCAMLA), amended 2019, 6.5 billion Kenyan Shillings (KSh) (USD in 2017, which anchored relevant asset 60.7 million) were domestically recovered recovery provisions in national law, as part of and 20 billion Ksh (USD 186 million) were addressing gaps identified in the FATF review frozen. The EACC also collects and publishes process. This law established an independent relatively detailed asset recovery statistics,12 institution responsible for AML/CFT issues: and, in 2019 alone, anti-corruption officials the Financial Reporting Centre (FRC). The recovered USD 40 million with the support of FRC’s objectives include, among others, international partners.13 tracking the proceeds of corruption and crime abroad and within Kenya’s jurisdiction.18 KENYA HAS ALSO INITIATED A Importantly, the FRC shares intelligence with MULTILATERAL PLATFORM: THE the Assets Recovery Agency, which is a FRAMEWORK FOR THE RETURN OF semi-autonomous body under the office of ASSETS FROM CORRUPTION AND CRIME the Attorney-General and has the mandate (FRACCK), AGREED AND SIGNED IN to confiscate any assets that are a product of 2018 BY THE GOVERNMENTS OF KENYA, the proceeds of crime.19 The Act also brought JERSEY, SWITZERLAND AND THE UK, THIS in a civil forfeiture regime, intending to lower FRAMEWORK SUPPORTS TRANSPARENCY the burden of proof for seizing the proceeds AND ACCOUNTABILITY IN ASSET RETURN. of corruption. Despite some progress in the application of the non-conviction based The signature of the agreement hopefully procedure, the tool is still underutilised signals political commitment on the side according to Kenyan law practitioners and of the Kenyan government and its partner has the potential for further application.20 governments, which will further facilitate cooperation leading to asset returns to Kenya. This instrument has already had an impact on successful asset repatriation of around GBP 3 million from Jersey.14 In a drive to regulate the management and utilisation of recovered assets and after CIFAR.EU [email protected] PB 3 TRANSNATIONAL CORRUPTION CASES AND EXTRATERRITORIAL SANCTIONS: KENYA’S EXPERIENCE Kenya has occasionally hit international however halted the probe citing lack of headlines with grand-corruption cases that cooperation by Kenyan authorities.25 have had global reach and are of substantial size. In 2002, based on whistleblowing by This case illustrates some of the problems John Githongo, a presidential advisor on that Kenyan institutions struggle with in corruption, the Kenyan Anti-Corruption deterring, prosecuting, and recovering large- Commission investigated a consortium of scale corruption. No convictions have ever Kenyan and international companies in the been reached in this case, only a fraction of Anglo Leasing Group and revealed 18 grossly the stolen assets have been located in Kenya overpriced state security contracts worth a and abroad, and only an insignificant portion combined $770m. After the scandal was has been returned.26 made public, some of the credit supplier companies involved voluntarily refunded the In terms of the damage to the Kenyan full amounts relating to their commitments.21 treasury, the Goldenberg scandal may even However, beneficial ownership of the entities surpass the Anglo Leasing case. Goldenberg involved in the Anglo Leasing case has International, a company partly owned by never