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Kenya

Beneficial Ownership (KE0018)

Overview

At-a-Glance

Action Plan: Kenya Action Plan 2018-2020

Action Plan Cycle: 2018

Status: Active

Institutions

Lead Institution: Office of the Attorney General (AG),

Support Institution(s): Other actors involved - government Ministry of ICT, ICTA Other actors involved - CSOs, private sector, working groups, Multilaterals etc INFONET Africa, Transparency International (K) and Humanistic Institute for Cooperation with Developing Countries (Hivos) East Africa.

Policy Areas

Access to Information, Anti-Corruption, Beneficial Ownership, E-Government, Legislation & Regulation, Open Data, Private Sector

IRM Review

IRM Report: Kenya Design Report 2018-2020

Starred: Pending IRM Review

Early Results: Pending IRM Review

Design i

Verifiable: Yes

Relevant to OGP Values: Access to Information , Public Accountability

Potential Impact:

Implementation i

Completion: Pending IRM Review

Description

Commitment 1: Beneficial ownership
We will publish a central public register of company beneficial ownership
information operating in the Republic of Kenya
Objective
The proposed beneficial ownership register will bring greater transparency services in
Kenya.
Status quo
We currently collect but do not publish this information in an open and centrally
accessible and in machine readable format.
Ambition
The Companies Act, 2015 (“the Act”) has been amended by the Companies
(Amendment) Act, 2017, to promote transparency in the ownership of companies in
Kenya as committed in Kenya’s OGP NAP II. The Act now includes a definition of a
beneficial owner and requires that every company keep a register of its members which
shall include information relating to the beneficial owners of the company and must be
lodged with the Registrar of Companies within 30 days after its preparation, and within
14 days in case of amendment(s). The President in June 2018 through Executive Order
2 of 2018 further directed that all entities wishing to provide goods, works and services
across all National and County Governments must disclose Beneficial Ownership
Information online for public scrutiny.
Lead implementing Organization
Office of the Attorney General (AG),
Contact Person:
Ms Mariam Shighadi Mwakio,
Email: mwakiomariam@gmail.com
+254 721 585 443
Timeline
September 2018 to May 2020
OGP values
Access to information, Public accountability
Page 18 of 30
New or ongoing commitment
On-Going
Other actors involved - government
Ministry of ICT, ICTA
Other actors involved - CSOs, private sector, working groups, Multilaterals etc
INFONET Africa, Transparency International (K) and Humanistic Institute for
Cooperation with Developing Countries (Hivos) East Africa.
Verifiable and measurable milestones to
fulfil the commitment
New or
ongoing
Start date End date
1. Conduct a national risk assessment,
consult external stakeholders (e.g.
financial institutions, designated nonfinancial businesses or professions
(DNFPBs), Private Sector and NGOs
New October
2018
February
2019
2. Develop regulations that govern and
give effect to Beneficial Ownership
legislation
New September
2018
December
2018
3. Develop an open, accessible and
machine-readable beneficial
ownership register on BO standards
Ongoing December
2018
July
2020
4. Establish a central register of foreign
and local companies bidding on public
contracts and buying property
New January
2019
May
2020
5. Build a module on the Beneficial
Ownership Register Information of
companies and individuals convicted
of bribery and corrupt practices
New August
2019
December
2019

IRM Midterm Status Summary

1. Beneficial Ownership

Language of the commitment as it appears in the action plan:

“We will publish a central public register of company beneficial ownership information operating in the Republic of Kenya”

Objective: The proposed beneficial ownership register will bring greater transparency services in Kenya.

Milestones

  1. Conduct a national risk assessment, consult external stakeholders (e.g. financial institutions, designated non-financial businesses or professions (DNFPBs), Private Sector and NGOs
  2. Develop regulations that govern and give effect to Beneficial Ownership legislation
  3. Develop an open, accessible and machine-readable beneficial ownership register on BO standards
  4. Establish a central register of foreign and local companies bidding on public contracts and buying property
  5. Build a module on the Beneficial Ownership Register Information of companies and individuals convicted of bribery and corrupt practices

Start Date: September 2018

End Date: May 2020

Editorial note: This is a partial version of the commitment text. For the full commitment text see: https://www.opengovpartnership.org/wp-content/uploads/2018/12/KENYA_Action-Plan_2018-2020_0.pdf

Commitment Overview

Verifiability

OGP Value Relevance (as written)

Potential Impact

Completion

Did It Open Government?

Not specific enough to be verifiable

Specific enough to be verifiable

Access to Information

Civic Participation

Public Accountability

Technology & Innovation for Transparency & Accountability

None

Minor

Moderate

Transformative

Not Started

Limited

Substantial

Completed

Worsened

Did Not Change

Marginal

Major

Outstanding

1. Overall

X

X

X

X

Assessed at the end of action plan cycle.

Assessed at the end of action plan cycle.

Context and Objectives

Kenya is currently ranked 144 out of 180 countries on the Corruption Perception Index 2018 [1] which suggests that despite the arsenal of commitments made and initiatives undertaken over the last decade, corruption continues to have a significant impact on the country and its citizens. Kenya has also increasingly been described as being at high risk for money laundering activity and scores low on the Basel AML Index. This is especially in regard to the quality of its institutional and legislative framework concerning anti-money laundering and counter financing for terrorism. [2] The President of Kenya therefore declared corruption a national threat in 2015 [3] [4] and in 2016, the Judiciary responded to these realities by establishing an Anti-Corruption and Economic Crimes Division at the High Court. [5] [6] In 2019, the President once again renewed his and the government’s commitment to fighting the vice. [7] Publishing a central public register on beneficial ownership (BO) was an extension of this commitment.

The commitment on BO is also derived from assurances given by former Attorney General, Githu Muigai, at the anti-corruption summit in London in 2016, which would commit the country to exposing and reducing public sector corruption and stopping illicit financial flows. [8] NAP III furthers this ambition by widening the scope of the commitment made previously in NAP II in order to address the inaccessibility of information collected on beneficial ownership. [9] This challenge was caused in part by a clause in section 104 of the Companies Act (2015), which stood in variance with requirements around company disclosures and transparency. Additionally, the Register of Companies did not capture beneficial ownership information and lacked the tools to capture this information. [10] The evaluation of NAP II also identified further areas that required attention such as: opening up “IFMIS contracting processes”, auditing of information submitted on beneficial ownership and strengthening the regulatory framework around beneficial ownership. [11] The milestones outlined under this commitment address some of these areas. In addition to this, the commitment will also address the publication of information on property or real estate purchases, though the portal currently only contains infrastructure development related information and does not reflect property transactions. The hope is also that ‘Usajili’ will eventually be linked to the Public Procurement Information Portal and that these platforms will be made even more accessible to the public. This is given concerns that described access to the entire database as being enabled only for law enforcement. [12]

Kenya has since shown significant progress in relation to the development of BO legislation through the enactment of the Companies (Amendment) Act (2017), the proposed Statute Laws Amendment Bill, (2018) and the Companies (Beneficial Ownership Information) Regulations (2019). The activities proposed under NAP III will further contribute to this through the conducting of risk assessments, developing associated regulations, establishing a central open beneficial register, with modules spotlighting persons of interest and those convicted of crimes in this regard. An additional register will also be developed with a component on transactions involving both local and foreign entities and covering purchase of public property, given that the acquisition of real estate is often tied to money laundering schemes. [13] [14] [15] As of September 2019, the electronic BO register had also been developed and a demo site been presented to various stakeholders. [16]

As outlined in the action plan, the objectives, expected results and activities are clear and can be objectively verified. In regards to specificity, the milestones outline various quality dimensions of processes that will be undertaken, using ‘openness’, ‘consultative’, ‘accessibility’ and ‘machine readability of registers’ as descriptors of the BO register. The level of specificity regarding some of its various activities can however improve especially in delineating the scope, target and/or timelines for implementation. The commitment is relevant to the OGP value of access to information through the beneficial ownership register. In addition to this, achieving milestone four and five will also create a repository of relevant information. The commitment also speaks to the OGP value of public accountability by aiming to develop regulations that will “give effect to Beneficial Ownership legislation”. The regulations will also determine, to an extent, the quality of information submitted to the Registrar of Companies and eventually what is disclosed. Furthermore, the regulations will establish standards against which the state and other entities can be held to account. [17]

The contribution of a beneficial ownership registers to the fight against corruption has been well documented, with BO initiatives contributing to resolving issues of conflict of interest, tracing illicit financial flows, recovering stolen assets and saving on the costs of law enforcement. [18] [19] The establishment of a beneficial ownership register is a key step in the right direction and could have transformative impact in the long run. However, the commitment has been rated as having “moderate” impact for various reasons.

Firstly, accessibility to the register is not clearly defined. There are some concerns that the current draft regulations introduce access restrictions in having access limited to law enforcement agencies or the ‘competent authorities’ as they are commonly referred to. [20] Additionally access may be contingent on payment of an administrative fee. [21] [22] According to one official, these concerns are currently being addressed through the creation of two channels or means of accessing BO information based on global BO standards: one channel will be a basic search that can be conducted by any citizen, free of charge. The second channel is an official search, which is considered more extensive and will be charged a fee of Kes. 500 ($5). The official search may however only be accessible by those deemed to be competent authorities. [23] Though this fee may be viewed as being minimal, the allowance is generally outside the realm of acceptable best practice. Furthermore, though access by the public is implied in the objective there is however no explicit mention of what the public will specifically have access to. Save for milestone four, the notion of public access is not explicitly mentioned in any milestone.

Secondly, the rationale for milestone five is well understood and is being supported by various other efforts such as the establishment of the Taskforce on the National Risk Assessment on Money Laundering and Terrorism Financing in March 2019. However, corruption conviction rates in Kenya are characteristically low more so for high profile persons involved in bribery and corruption. [24] [25] [26] This has been attributed to a variety of factors including: poor evidence handling, arrest records, sluggish court processes and challenges with the criminal justice system. [27] [28] The realization of this milestone is therefore contingent on significant external factors that the Business Registration Service has very little control over.

In regard to milestone one a government officer reported that the risk assessment was undertaken in 2018, prior to the launch of the current NAP. [29] This was conducted mainly via the convening of four forums held within three of Kenya’s main cities. These forums were attended, on invitation, by members of the private sector, legal fraternity, civil society, and government officials (national and county level). [30] The principles of beneficial ownership indicate that a risk assessment should produce “a clear understanding of the types of legal persons and arrangements that exist in the country, their formation and registration process, their different forms and structures and the risks they pose is foundational to a substantive risk assessment.” [31] Therefore, while the participatory approach is appreciated, it is unclear whether it would adequately determine the level of risk present.

Widening the scope of public participation would also be welcome, though resource limitations are a likely factor that contributed to the limited participation. The current draft regulations are also said to be silent on the number, frequency and methodology that these risk assessments should take. [32] In addition to this, concerns raised at the ‘risk assessment’ forums in 2018 revolved around issues of data protection, security and privacy as well. It is unclear how these concerns will be addressed, though a Data Protection Bill (2018) has been published. [33] Lastly, it is also unclear whether particular loopholes in the Act have been addressed in the guidelines, such as clauses that could see parties hide behind nominee shareholders. [34] These should be addressed.

Next steps

The milestones can be further enhanced by making them more specific. For instance, milestone one aims to undertake a risk assessment. However, the focus of this risk assessment is unclear despite guidance indicating that such assessments should target various “arrangements or persons”, for example money laundering, terrorist financing or legal persons. [35] [36] This would enhance understanding of the nature of threat and risk underfoot, as well as establish a baseline for evaluating progress. The frequency of these assessments is also not clear in the current plan. Milestone two could also be strengthened by ensuring that regulations are developed against or according to best practice. [37] In addition to these the government and civil society can take various steps to enhance the impact of this commitment by:

  • Revisiting the risk assessment methodology and ensuring that risk assessments be conducted annually with findings published in the public domain.
  • Creating a link between the “asset declaration of public officials and the BO register as was recommended in NAP II.
  • Reintroducing the audit or verification of the BO register as was raised in NAP II, given that the register will be dependent solely on the veracity of information submitted to the portal. Initiatives under this commitment could be expanded to include processes of robust verification, integration, maintenance and monitoring as has been recommended.
  • Developing a module that allows the public to provide comments or feedback.

[1] Transparency International (2019) Corruption perception Index 2018. https://tikenya.org/wp-content/uploads/2019/01/2018-Corruption-Perception-Index.pdf
[2] United States Department of State (2019) International Narcotics Control Strategy Report Volume II Money Laundering. Bureau of International Narcotics and Law Enforcement Affairs https://www.state.gov/wp-content/uploads/2019/03/INCSR-Vol-INCSR-Vol.-2-pdf.pdf
[3] Nsehe, M (2015) Corruption and 'Tenderpreneurs' Bring Kenya's Economy To Its Knees. Forbes, 1 December 2015 https://www.forbes.com/sites/mfonobongnsehe/2015/12/01/corruption-and-tenderpreneurs-bring-kenyas-economy-to-its-knees/#6cd46b15abea
[4] PSCU (2015) President Uhuru Kenyatta declares corruption a national security threat , The Standard , 23rd November 2015. https://www.standardmedia.co.ke/article/2000183336/uhuru-declares-corruption-a-national-security-threat
[5] United States Department of State (2019) International Narcotics Control Strategy Report Volume II Money Laundering. Bureau of International Narcotics and Law Enforcement Affairs https://www.state.gov/wp-content/uploads/2019/03/INCSR-Vol-INCSR-Vol.-2-pdf.pdf
[6] Basel Institute on Governance (2019) Basel AML Index 2019: A country ranking and review of money laundering and terrorist financing risks around the world International Centre for Asset Recovery. Available at: https://www.baselgovernance.org/sites/default/files/2019-08/Basel%20AML%20Index%202019.pdf
[7] The Presidency (2019) Speech By His Excellency Hon. Uhuru Kenyatta, C.G.H., President And Commander In Chief Of The Defence Forces of The Republic Of Kenya During The Multisectoral Initiative Against Corruption-National Anti-Corruption Conference At Bomas Of Kenya, 25th January 2019. Available at http://www.president.go.ke/2019/01/25/speech-by-his-excellency-hon-uhuru-kenyatta-c-g-h-president-and-commander-in-chief-of-the-defence-forces-of-the-republic-of-kenya-during-the-multisectoral-initiative-against-corruption-national-an/
[8] Office of the Attorney General and Department of Justice (2016) Kenya Attends Anti-Corruption Summit in UK,13th May 13th 2016, Department of Public Communication. https://www.statelaw.go.ke/kenya-attends-anti-corruption-summit-in-uk/
[9] Kenya OGP Steering Committee (2016) The Republic of Kenya Open Government Partnership National Action Plan II July 2016 – June 2018. Available at: https://www.opengovpartnership.org/wp-content/uploads/2017/04/Kenya_AP2_2016_0.pdf
[10] Transparency International -Kenya (2017) Towards Beneficial Ownership Transparency in Kenya an Assessment of the Legal Framework. Available at: https://tikenya.org/wp-content/uploads/2017/11/beneficial-ownership.pdf
[11] Independent Reporting Mechanism (IRM) (2018) Kenya Progress Report 2016- 2018. Open Government Partnership. Available at: https://www.opengovpartnership.org/wp-content/uploads/2018/05/Kenya_MidTerm-Report_2016-2018_for-public-comment.pdf
[12] Transparency International UK, Access to International Law Enforcement, Anti-corruption Pledge Tracker https://www.anticorruptionpledgetracker.com/commitments/access-to-international-law-enforcement-6/
[13] Omondi, D(2019) How CBK crackdown on dirty cash coincided with slump in real estate. The Standard Digital 13th October 2019. https://www.standardmedia.co.ke/business/article/2001345336/how-cbk-crackdown-on-dirty-cash-coincided-with-slump-in-real-estate
[15] Gumba, D.E.O (2019) Kenya must do more than just find the money. Institute Of Security Studies,18 June 2019. Available at:: https://issafrica.org/iss-today/kenya-must-do-more-than-just-find-the-money
[16] Interview 8, Interview with IRM Researcher, 31st August 2019.
[18] Open Ownership (2017) Learning the lessons from the UK’s public beneficial ownership register. Available at https://www.openownership.org/uploads/learning-the-lessons.pdf
[19] UNODC (2017) Follow-up to the St. Petersburg Statement: Report of the international expert group meeting on beneficial ownership transparency, held in Vienna from 3 to 4 October 2017 , Conference of the States Parties to the United Nations Convention against Corruption Seventh session, Austria, 6-10 November 2017. Available at: https://www.unodc.org/documents/treaties/UNCAC/COSP/session7/V1707523e.pdf
[20] Transparency International UK (2019) Access to International Law Enforcement. Available at: https://www.anticorruptionpledgetracker.com/commitments/access-to-international-law-enforcement-6/
[22] Transparency International -Kenya (2017) Towards Beneficial Ownership Transparency in Kenya an Assessment of the Legal Framework. Available at: https://tikenya.org/wp-content/uploads/2017/11/beneficial-ownership.pdf
[23] Interview 8, Interview with IRM Researcher,
[24] Gumba, D.E.O (2019) Kenya must do more than just find the money. Institute of Security Studies,18 June 2019. Available at:: https://issafrica.org/iss-today/kenya-must-do-more-than-just-find-the-money
[25] World Politics Review (2019) Is Kenyatta Finally Getting Serious About Tackling Corruption in Kenya? World Politics Review, 16 September 2019, https://www.worldpoliticsreview.com/trend-lines/28192/is-kenyatta-finally-getting-serious-about-tackling-corruption-in-kenya
[26] Ngenye, G. (2018) Finding a Cure of Kenya’s Criminal Justice System. The Judiciary, January 27, 2018. Available at: https://www.judiciary.go.ke/finding-a-cure-of-kenyas-criminal-justice-system/
[27] Ngenye, G. (2018) Finding a Cure of Kenya’s Criminal Justice System. The Judiciary, January 27, 2018. Available at: https://www.judiciary.go.ke/finding-a-cure-of-kenyas-criminal-justice-system/
[28] ICJ (2018) Criminal Justice Reforms: Issues and Options for Kenya. https://icj-kenya.org/news/latest-news/184-criminal-justice-reforms-issues-and-options-for-kenya
[29] Interview 8, Interview with IRM Researcher, 31st August 2019.
[30] Interview 8, Interview with IRM Researcher, 31st August 2019.
[31] Transparency International (2015) Beneficial Ownership Principles, G20 Position Paper. Available at: https://www.transparency.org/files/content/activity/2015_TI_G20PositionPaper_BeneficialOwnership.pdf
[32] Interview 8, Interview with IRM Researcher, 31st August 2019.
[33] Interview 8, Interview with IRM Researcher, 31st August 2019.
[34] Transparency International -Kenya (2017) Towards Beneficial Ownership Transparency in Kenya an Assessment of the Legal Framework. Available at: https://tikenya.org/wp-content/uploads/2017/11/Beneficial-Ownership.pdf
[35] Transparency International (2015) Beneficial Ownership Principles, G20 Position Paper. Available at: https://www.transparency.org/files/content/activity/2015_TI_G20PositionPaper_BeneficialOwnership.pdf
[36] Financial Action Task Force (2014) FATF guidance Transparency and Beneficial Ownership. FATF/OECD. Available at: http://www.fatf-gafi.org/media/fatf/documents/reports/Guidance-transparency-beneficial-ownership.pdf
[37] Transparency International (2015) Beneficial Ownership Principles, G20 Position Paper. Available at: https://www.transparency.org/files/content/activity/2015_TI_G20PositionPaper_BeneficialOwnership.pdf

Commitments

  1. Create public beneficial ownership register

    KE0024, 2020, Access to Information

  2. Implement e-government system adopting Open Contracting Data Standard

    KE0025, 2020, Access to Information

  3. Publish open data to spur innovation in public service delivery and development

    KE0026, 2020, Access to Information

  4. Increase efforts to promote public participation in the legislative process

    KE0027, 2020, E-Government

  5. Apply County Peer Review Mechanism to improve public service delivery

    KE0028, 2020, E-Government

  6. Implement Access to Information Act

    KE0029, 2020, Access to Information

  7. Implement legislation to increase access to justice

    KE0030, 2020, Access to Justice

  8. Build institutional support of OGP

    KE0031, 2020, Capacity Building

  9. Beneficial Ownership

    KE0018, 2018, Access to Information

  10. Open Contracting

    KE0019, 2018, Access to Information

  11. Open Geo-Spatial Data for Development

    KE0020, 2018, Access to Information

  12. Public Participation

    KE0021, 2018, Capacity Building

  13. Governance Indices

    KE0022, 2018, Capacity Building

  14. Open Government Resiliency

    KE0023, 2018, Capacity Building

  15. More Transparent and Participatory Development of Climate Polices at the National and Subnational Level

    KE0010, 2016, Access to Information

  16. Enhancing Preventive and Punitive Mechanisms in the Fight Against Corruption and Unethical Practices

    KE0011, 2016, Anti-Corruption

  17. Enhance Transparency in the Legislative Process

    KE0012, 2016, E-Government

  18. Publish Oil and Gas Contracts

    KE0013, 2016, Anti-Corruption

  19. Starred commitment Ensure Greater Transparency Around Bids and Contracts

    KE0014, 2016, Anti-Corruption

  20. Create Transparent Public Procurement Process, Public Oversight of Expenditure and Ensure Value-For-Money Towards Citizen Priorities

    KE0015, 2016, Access to Information

  21. Improving Access to Government Budget Information and Creating Wider and More Inclusive Structures for Public Participation

    KE0016, 2016, E-Government

  22. Starred commitment Enhance Right to Information

    KE0017, 2016, Access to Information

  23. Starred commitment Improving Transparency in Electoral Processes: 1.A. Definition of Electoral Boundaries and Name.

    KE0001, 2012, Media & Telecommunications

  24. Improving Transparency in Electoral Processes: 2.B. Voting Information Online

    KE0002, 2012, Access to Information

  25. Promoting Public Participation: 1.B. End-To-End Service Delivery Portal

    KE0003, 2012, E-Government

  26. Promoting Public Participation: 1.D. Public Complaints Portal

    KE0004, 2012, E-Government

  27. Promoting Public Participation: 2.C. Kenya Action Plan Online

    KE0005, 2012, Public Participation

  28. Promoting Public Participation: 1.C. Open Data Portal

    KE0006, 2012, Access to Information

  29. Starred commitment Improving Transparency in the Judiciary: 2.A. Public Vetting of Judges and Case Allocation System

    KE0007, 2012, E-Government

  30. Open Budgets: 3.a. Improve Kenya's OBI Index

    KE0008, 2012, Fiscal Openness

  31. Open Budgets: 3.B. Increase Public Participation in Budgetary Processes

    KE0009, 2012, Access to Information

Open Government Partnership