The Sacco Societies Regulatory Authority (SASRA), in partnership with the Financial Reporting Centre (FRC), has developed guidelines for regulated SACCOs to combat Money Laundering, Terrorism Financing, and Proliferation Financing in 2024. This aims to strengthen compliance with the Anti-Money Laundering (AML), Combating Terrorism Financing (CTF), and Countering Proliferation Financing (CPF) legal and regulatory framework within the SACCO industry.
The board of directors of a regulated SACCO is responsible for ensuring the development and adoption of Anti-Money Laundering/Combating Terrorism Financing/Countering Proliferation Financing policy, considering the SACCO’s size, complexity, business activities, and risk profile. They should also establish adequate internal control measures to address potential money laundering, terrorist financing, and proliferation risks, and provide sufficient resources, including financial and human resources, as well as training for staff on a regular basis in the prevention, detection, and control of money laundering.
On the other hand, SACCO management is responsible for implementing the existing legal and regulatory framework outlined in the guidelines on a day-to-day basis. They should also make regular updates to the board of directors, obtain and verify proper identification of members or customers wishing to open accounts or make transactions, and maintain adequate records as stipulated in the guidelines.
The penalties for non-compliance include directives to rectify non-compliance, prohibition orders barring the employment of the officer by any employer, suspension or revocation of the SACCO Society’s license or authorization, and suspension or removal of the person as an officer of a SACCO society. Individuals may face imprisonment for a term not exceeding 7 years or a fine not exceeding 2.5 million shillings, or both, while SACCOs as corporate bodies may be fined an amount not exceeding 10 million shillings, or the value of the property involved in the offense, whichever is higher.
Money Laundering is the process of concealing the real source of illegally acquired money or assets to obscure the link between the funds and the original criminal activity. This results in transforming the proceeds of illegal or criminal activity into apparently legitimately acquired funds through the exploitation of normal financial transactions involving moving money across different jurisdictions, individuals, and accounts, as well as across different types of financial instruments.
The three stages of Money Laundering are:
- Placement: The physical disposal of cash or other assets derived from criminal activity, introducing illegal proceeds into the financial system.
- Layering: Undertaking a series of conversions or movement of funds to distance the funds from their original source, intended to conceal the origin of the proceeds.
- Integration: The presentation of apparent legitimacy to criminally derived wealth, placing the laundered proceeds of crime back into the legitimate economy.
The three basic steps in Money Laundering may occur as separate and distinct phases, simultaneously overlapping. Responsibilities of the Board of Directors include ensuring compliance, developing policies, and providing necessary resources for combating Money Laundering and Terrorism Financing within the SACCO.
