STRATHMORE UNIVERSITY

SCHOOL OF MANAGEMENT AND COMMERCE

MCOM - FORENSIC ACCOUNTING

RESEARCH METHODOLOGY : CRITICAL REVIEW
CRITIQUE OF RICHARD NJOROGE AND ERIC NIPAHS ARTICLE;
ANTI-MONEY LAUNDERING (AML): THE KENYAN EXPERIENCE
PUBLISHED IN THE FINANCIAL FOCUS 2011, www.pwc.com/ke

067413

Ongoma Anthony Shitandi

Submitted on 9th February, 2012

CRITICAL REVIEW OF RICHARD NJOROGE AND ERIC NIPAHS ARTICLE,

ANTI-MONEY LAUNDERING (AML): THE KENYAN EXPERIENCE PUBLISHED
IN THE FINANCIAL FOCUS 2011, www.pwc.com/ke

INTRODUCTION
Njoroge and Nipah (2011) analyze the details, effects and challenges of the Proceeds of Crime
and Anti-Money Laundering Act (2009), which borrows heavily from the CBK Prudential
Guidelines on Money Laundering (1999) in Kenya. This analysis aimed to provide an insight to
banks, Investment funds, casinos, real estate agents, legal professionals, accountants and
supervisory authorities on the appropriate structural and procedural changes they need to
undertake so as to be in compliance.

SUMMARY
The authors adopts the Money Laundering definition by A Bankers Guide to Avoiding Problems,
Office of the Controller of the Currency, Washington DC (Dec 2002) which views money
laundering as the criminal process of filtering ill-gotten gains or dirty money through a series of
transactions so that the proceeds are cleaned to look like proceeds from legal activities. They
then refer to financial, non financial and supervisory bodies charged with the responsibility of
suspecting and detecting such proceeds as reporting Institutions.
Njoroge and Nipah advise that with the coming to force of the AML Act, there are clear channels
of identifying, tracing, freezing, and seizing proceeds of crime and corruption. They further
outline the roles and responsibilities of reporting institutions in detecting Money Laundering and
the state that if these are not complied with such institutions risk stiff penalties.
Away from the matter of the Act, the authors examine the effects of the law on the Banking
sector in Kenya and mention that the AML imposed regulations are going to be new only to non
financial institutions since Banks were already operating in a regulated environment under the
CBK Prudential Guidelines on Money Laundering (1999).
They then rationalize the need for this Act, and the perceived need for the Kenyan banks to be in
compliance since they believe the implementation of the AML Standards will improve the risk
rating of local banks and make it easier for them to indulge in correspondent relationships.
The author concludes by highlighting the challenges they believe will be met in executing this
law. They for instance highlight the dilemma of bankers to serve their clients in confidence and
at the same time report suspect transactions to the CBK. They however affirm that the AML Act
supersedes any confidentiality requirement under any other law.

CRITIQUE
The authors have incredibly simplified the language of the act and made visible issues they
considered pertinent. They have also carefully selected and broken down the definitions of
working phrases to the level of understanding of their intended audience. George Kegoro,
Profiling Money Laundering in Eastern and Southern Africa (2002) and GoK, Proceeds of Crime
and Anti-Money Laundering Act (2009) affirm the definition of Money Laundering and
Reporting Institutions as used by the authors.
The authors have also made clear their aim and partially achieved it in this article since the
banking industry has been addressed as regard to its responsibilities, exposures and ways of
ensuring compliance. Their approach of ensuring compliance through training staff and adopting
modern technology is admitted as true by the works of Jackson Okoth, Beware Dirty Money,
(2010), published in the Financial Post.
The Authors have however adopted a convenient approach in their analysis of defending and
exalting the Act as a long-due prescription to the money laundering problem without being clear
specifically why the problem exists in the Kenyan context. An act criminalizing Money
Laundering may not necessarily have much effect in Kenya especially if the problem is
perceived as a mere behavioral problem, akin to other criminal acts that have been outlawed by
legislation as well but in reality often go un-rebuked in our society, M Mati and J Githongo
Judicial decisions and the fight against corruption in Kenya, an unpublished paper contributed to
the International Commission of Jurists state of the rule of law report (2001). Is the genesis of
the problem a question of unobstructed opportunities, or is the problem exasperated by a culture
of impunity? Does a legal solution cure a social problem?
They misleadingly imply that the Act is going to improve the risk rating of local banks yet in the
same article they have argued that Banks are not Strangers to the Money Laundering regulatory
environment since they are already operation under CBKs Prudential Guidelines on Money
Laundering (1999).
They also mention penalties, and fail to quantify the penalties as stated in the Act. This
analytical approach is unyielding since Penalties act as deterrence to illegal acts as observed by
Mutahi Ngunyi, Liberalising a Bandit Economy (2000) and as such should be made known.
As to whether they conclusively analyzed the Money Laundering framework as stated by the Act
is debatable, as they did not bring forth any new body of knowledge not in the professional
domain of their target audience before the Act. It was expected that they will expound further on
the effects of this law to Institutions that were foreign to regulatory environment, a subject they
sadly shied away from. They instead dwell entirely on the Banking sector which long adopted
AML regulations and is already complying with some features like Know Your Customer
(KYC), Hiring specialist staff, improving their systems and setting up controls to pick suspect
activities, Jackson Okoth, Beware Dirty Money (2010).

CONCLUSION
Wrapping up, it is clear that the debate about Money Laundering is still as grey as it were before
contributions by Njoroge and Nipah (2011) and as such more research and analysis need to be
done on the social roots and solutions to the problem that is Money Laundering. Further to that, a
study needs to be done on what this Act means to the business of non financial Institutions like
Casinos, real estate agents, legal professionals and accountants.

REFERENCE
Mutahi Ngunyi, Liberalising a Bandit Economy (2000)
CBKs Prudential Guidelines on Money Laundering (1999)
George Kegoro, Profiling Money Laundering in Eastern and Southern Africa (2002)
M Mati and J Githongo Judicial decisions and the fight against corruption in Kenya, an
unpublished paper contributed to the International Commission of Jurists state of the rule of law
report(2001