Kenya is betting on a public register of people who ultimately own or control trusts to help stem the flow of illicit money and boost its chances of exiting the global money laundering grey list.

The Trust Administration Bill, 2026, currently before Parliament, introduces sweeping reforms in the regulation of trusts, including mandatory disclosure of ultimate beneficiaries and enhanced oversight of trustees.

A trust is a legal arrangement where a person transfers property or assets to a trustee who holds and manages them for the benefit of specific beneficiaries.

Trusts in Kenya are currently governed mainly by the Trustees (Perpetual Succession) Act, which does not make it mandatory to disclose beneficial owners. The law has left room for use of such vehicles for money laundering and terrorism financing.

The Financial Reporting Centre (FRC) says the gap is a weak link in Kenya’s fight against money laundering and the proposed law will seal such loopholes, boosting Kenya’s chances of exiting the Financial Action Task Force (FATF) grey list.

Kenya was grey-listed in February 2024 following a 2021 mutual evaluation by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which found gaps in compliance with global standards, including on transparency and beneficial ownership of trusts.

“The Bill in its current form and content largely addresses the international standards required of countries by ensuring transparency and beneficial ownership aimed at protecting abuse of corporate structures to perpetrate money laundering and terrorism financing,” said the FRC in its submission to lawmakers.

The FRC notes that beyond compliance, the proposed law will improve the credibility and utility of trusts in legitimate activities such as wealth management, commercial transactions and charitable work by enhancing transparency and accountability.

The Bill, said the FRC, will strengthen Kenya’s anti-money laundering regime and address deficiencies identified under FATF recommendation 25, which relates to the transparency and beneficial ownership of trusts.

Improved access to beneficial ownership information will enhance the ability of regulators and law enforcement agencies to detect and investigate financial crimes, including money laundering and terrorism financing.

Kenya was rated as “partially compliant” with this recommendation, pointing to gaps that needed to be addressed to fully meet international standards.

The global watchdog asked the country to review its legal regime governing operations of trusts including designating a competent authority to regulate trusts, maintaining accurate and up-to-date beneficial ownership information on trusts and setting sanctions for non-compliance.

Under the proposed law, trusts will be required to register in a centralised database as a condition for legal recognition, marking a shift from the current fragmented framework that has been criticised for enabling opacity in ownership structures.

Trustees will also be required to maintain accurate and up-to-date records of beneficial owners and retain the information for at least seven years, in line with international standards.

Information on beneficial owners will include the residence of the trustees and their equivalents and any assets held or managed by the financial institution or designated non-financial businesses and professions.

The data on beneficial ownership will be accessible to authorities such as the FRC and reporting institutions, including financial institutions and designated non-financial businesses and professions.

The Bill further introduces strict enforcement measures, including administrative and criminal penalties for non-compliance, with fines and possible imprisonment aimed at deterring abuse of trust structures.

Individuals and corporate entities face penalties of up to Sh500,000 and Sh2 million respectively for failing to maintain records of beneficial owners. Failure to share such records with enforcement agencies attracts higher fines of up to Sh1 million for individuals and Sh3 million for corporates.

The push for beneficial owners of trusts adds to a similar move concerning firms that trade with government.

Read: Kenya eyes exit from money laundering ‘grey list’ by May

The rules were introduced to fight corruption and conflict of interest, including situations where politically exposed persons or public officials secretly benefit from State contracts.

Kenya’s inclusion on the FATF grey list increased pressure on authorities to implement reforms within set timelines, with failure to comply potentially exposing the country to higher transaction costs, reduced investor confidence and tighter scrutiny in international financial markets.

Many jurisdictions now legally require trustees to disclose the beneficial owners of trusts such as settlors, trustees, protectors, beneficiaries, and controllers. The trend is driven largely by anti-money laundering directives and international standards.

Countries with active trust registries or mandatory disclosure rules include the United Kingdom and European Union member states like France, Germany, Italy, and Luxembourg. In Africa, countries like South Africa also have similar laws.

FATF has said earlier the level of misuse of corporate bodies such as trusts could be significantly reduced if the information regarding the ultimate beneficial owner, knowledge of the source of assets and the business objective were readily available to the authorities.

→ palushula@ke.nationmedia.com

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