This module is designed to provide learners with definitions of Money Laundering and Terrorism Financing and explain the three stages of the Money Laundering process. This module will prepare you as you go through the other modules that will provide you with the knowledge and skills required to identify and prevent money laundering from occurring in your organization, and the indicators, or ‘red flags’, of suspicious activity, and what to do if concerns are raised.

At the end of this module, you will be able to:

• Understand what is Money Laundering and Terrorism Financing
• Explain the three stages of Money Laundering
• Understand the history of anti-money laundering and counter financing of terrorism
• Understand the social costs of money laundering and terrorism financing

The aim of module 2 is to demonstrate how corruption facilitates money laundering, and vice versa, and specifically how the responses developed to combat one type of financial crime can productively be employed in fighting the other. Money laundering schemes are linked to corruption whereby the latter is utilized either as a means to an end or as an end in itself. Apparently, the existence of one of these offences in a country usually signifies the prevalence of the other.

In Kenya, corruption is rampant and those who have acquired public money illegitimately get involved in Money laundering to pass the illegal proceeds through the financial system. Understanding the link between corruption and money laundering is a critical step to stop these predicate crimes.

The accountancy profession is identified as one of the sectors most likely to be vulnerable to exposure to Money Laundering, and in fact, in some cases rated higher than banks, legal service providers, and estate agents. Therefore it is important for accountants to be aware of the behaviours that indicate a customer might be undertaking money laundering, the action to take and specifically the legal obligations as regards to identification and reporting.

Accountants are considered to be the gatekeepers of a country's financial system and therefore they need to have some understanding of money laundering and terrorism financing.

This module will try to provide some of the ways accountants are exposed to money laundering and outline how to guard themselves against such crimes.

The key Kenyan AML/CFT legislative framework is Proceeds of Crime and Anti-Money Laundering Act (POCAMLA).The Act was developed in 2009 to guide how anti-money laundering cases are to be identified and reported, as well as associated offences and penalties. It has gone through amendments to cater for the ever evolving financial crime landscape.

Reporting institution are required to exercise due diligence and take reasonable measures to satisfy themselves as to the true identity of any person seeking to enter into a business relationship with them. They have an obligation to require the person they are entering into business with to produce an official record reasonably capable of establishing the true identity of that person.

Identification and reporting of suspicious transactions is one of the foundation of an effective money laundering and terrorism financing control program. Reporting institutions should have an internal procedures that enables employees who have identified suspicions transaction or activity to subsequently report them to Money Laundering Reporting to subsequently report them to Financial Reporting Centre.

Record keeping is an important step towards complying and managing money laundering and countering the financing of terrorism. Records should be kept of relationships with clients. Record-keeping is a constant theme in anti-money laundering compliance. Understanding what recording keeping entails including the records that need to be kept and for how long is important. This module address this.

The POCAMLA regulations, 2013 require that all employees of the reporting institutions to be provided with customized and frequent trainings. The trainings is supposed to cover all the reporting institutions' AML/CTF obligations.

Financial Reporting Centre (FRC) examinations powers are legislated under section 24 of the Proceeds of Crime and Anti-Money Laundering Act.
FRC may, at any time, cause an inspection to be made of any reporting institution. The Centre will require that the reporting institution concerned produce and make available information sought by the inspector.

Supervisory body like ICPAK has an obligation to report to the Centre any suspicious transaction that it may encounter during the normal course of its duties.