Investor disclosure rule good for corruption fight AG

Attorney General Kihara Kariuki. FILE PHOTO | NMG

Summary

• Both public and private companies should ensure compliance with the order as a way of supporting the fight against vices such as money laundering.
• The private sector has in the past been accused of facilitating corruption and money laundering and therefore lifting the lid on investor profile will be crucial to stopping these malpractices.
• The risk of illicit financing is even higher with the rising cross-border activities that have seen Kenya attract thousands of international investors.

The Attorney-General’s order requiring companies to reveal details of investors who hold 10 percent stake or more is a good move and should be supported.

Both public and private companies should ensure compliance with the order as a way of supporting the fight against vices such as money laundering.

The private sector has in the past been accused of facilitating corruption and money laundering and therefore lifting the lid on investor profile will be crucial to stopping these malpractices.

The risk of illicit financing is even higher with the rising cross-border activities that have seen Kenya attract thousands of international investors.

Cases of people opening shell companies and stealing from unsuspecting investors are on therise. This law will be crucial in not only lowering such cases but also increasing the confidence of potential investors.

The move will help unmask unethical investors who hide their identities behind trusts, foundations and nominee accounts to stay under the radar of government agencies such as the Kenya Revenue Authority and the Ethics and Anti-Corruption Commission. The changes are a good example of Companies Act being aligned to the fast-changing landscape of business and the need to strike a balance between facilitating business and curbing illicit financing.

Companies should therefore comply and ensure that they freeze dividends and block share transfers of any top shareholder who will defy the requirement at the lapse of the deadline.

However, the government should also be alert to the fact that some genuine shareholders have been afraid to give their details for fear of the security of their data.

The registrar of companies should therefore safeguard crucial data such as KRA personal identification number (PIN), residential address and telephone numbers which can be a security scare to top investors if leaked to third parties.

Failure to comply with other laws such as the Data Protection Act 2019 can open floodgates of lawsuits, exposing taxpayers to losses amounting to billions of shillings.