Interoperability and Verification of Beneficial Ownership Information (KE0035)

Brief Description of the Commitment

By advancing Beneficial Ownership Transparency, the commitment seeks to enhance transparency in ownership of legal persons and arrangements with a view to improving public procurement processes; strengthening the public finance architecture, and enhancing public accountability processes

Problem Definition

1. What problem does the commitment aim to address?

More often than not, public funds are lost through tenders awarded to companies whose ownership is unclear or unknown. The effect of which results in challenges in identifying and prosecuting the true perpetrators of the vice and challenges in tracing, freezing and recovery of the lost assets. Further, allowing entities whose ownership is opaque to operate in the country opens it up for wider issues relating to the financing of terrorism, proliferation of arms and money laundering. The embezzlement and loss of public funds ultimately undermine the provision of various public services such as health and security to Kenyan citizens.

2. What are the causes of the problem?

Obscure company ownership has allowed unscrupulous persons to get away with corruption and embezzlement of public funds and other forms of illicit financial flows.

Commitment Description

1. What has been done so far to solve the problem?

The Companies Act, 2015 was amended in 2019 to provide for a definition of Beneficial ownership and requirements for companies to file their beneficial ownership information with the registrar of companies. Consequently, amendment regulations were published (Beneficial Ownership Information Regulations, 2020 to provide a roadmap for implementation. The regulations (Beneficial Ownership Information) (Amendment) Regulations, 2022 were amended further to provide for BO information of successful bidders of government contracts published at the Public Procurement Information Portal (PPIP). In the same vein, the amendments also widened the scope of persons authorized to access BO information to include public procuring entities and the public-private partnership committee. The President signed into Law the Anti-Money Laundering and Combating of Terrorism Financing (Amendment ) Act. 2023 into Law on 1st September 2023 with the commencement date being 15th September 2023. The Act contained amendments to the Companies Act of 2015 and the Limited Liability Partnership Act, of 2011. Section 31B has been introduced into the Act to provide that all LLP’s should keep a register of their beneficial owners and the existing partnerships within 60 days of coming into force of these amendments. For the Companies Act, 2015 all existing companies are now required to file Beneficial ownership information with the Registrar. This includes companies limited by guarantee, public companies and private limited companies. Separately, the country enacted the Data Protection Act, on November 8, 2019, which came into force on November 25, 2021. It establishes the Office of the Data Protection Commissioner (ODPC), whose mandate is to oversee the implementation and enforcement of the Act. The Act regulates the acquisition and processing of personal data by both public and private entities and demands that such entities obtain the consent of individuals before collecting, using, or disclosing their personal data. The compliance levels to the beneficial ownership laws remain below 50% and as such Kenya is not able to fully reap the benefits of the law as intended.

2. Proposed Solutions

The solutions proposed include ensuring that the BO register is interoperable with other government registries and databases to enhance interagency cooperation. This will also leverage existing data in the said databases to verify BO information. Additionally, it is expected that sustained awareness creation campaigns amongst individuals and business community players will enhance compliance to the laws. Ultimately , advocating for an open register will work towards enhancing citizen oversight on public finance management processes. 3. Desired Results  Publication of Beneficial Ownership Information in various formats  Strengthen implementation of the policy legal framework on AML/CFT Increased use of BO information for investigation, prosecution and adjudication of corruption and economic crimes  Reduced procurement malpractice in terms of issuance of public tenders  Prudent utilization of funds for public service provision

Commitment Analysis

1. How will commitment promote transparency? One of the milestones to the proposed commitment is centered on public access to the beneficial ownership register. This will allow citizens , local and international law enforcement agencies as well as investigative journalists and other interested stakeholder groups to access pertinent BO information.

2. How will commitment help foster accountability? The ultimate goal of the commitment includes utilization of the BO information to hold corrupt persons/entities to account, to reduce corruption and Illicit Financial Flows.

3. How will commitment improve citizen participation in defining, implementing, and monitoring solutions? By advocating for an open , central register that is publicly available , citizens and other stakeholder groups can access pertinent company ownership information for use in demanding accountability. Additionally , there are planned engagements to create awareness about Beneficial Ownership Transparency in Kenya.

Commitment Planning (Milestones | Expected Outputs | Expected Completion Date)

Enable Interoperability /interlinkages of BO register with other government systems | Effective access and utility of BO register by local Law Enforcement Agencies (DCI, National treasury /eGP/PPRA) | August 2026

Develop a framework/mechanism for verification of data after submission to reinforce reliability and accuracy. | Enhanced mechanisms that allow flagging of errors, discrepancies andcontradictoryinformation. | November 2026

Make open the public the central public register of beneficial ownership information on legal persons and arrangements operating in Kenya | Open Register available to the public | January 2027

Develop a mechanism to flag and publish directors and BO data of companies convicted of economic crimes (including bribery , money laundering ) as well as debarred companies under PPADA | Framework to flag and publish directors and BO data on companies | January 2027

Create awareness about the BO legislation in Kenya with the view to improve compliance by 15% by 2027 | Improved compliance by at least 5% each year | April 2027

Initiate and implement legal and policy framework changes to ensure Kenya’s compliance to FATF recommendations 24 and 25 | Improved rating by FATF | June 2027