Audit, law firms targeted in ownership transparency drive

Thousands of limited liability partnerships (LLPs) operating in the country are now compelled to reveal their beneficial owners for the first time as part of State-backed reforms to peel back the veil of secrecy about the entities.

LLPs were introduced in Kenya for the first time in March 2012 through the Limited Liability Partnerships Act, 2011 and are now common among professionals that face a high risk of malpractice suits such as lawyers, doctors and auditors.

The legal entities were excluded from the State-backed reforms in 2020 that were targeting companies to reveal their beneficial owners.

The Companies (Beneficial Ownership Information) Regulations of 2020 required all registered companies to disclose the personal details of their beneficial owners such as their names, national identity number, Kenya Revenue Authority (KRA) PIN, phone number, occupation and home address.

Read: Treasury wants companies to hire anti-money laundering officers

Attorney-General Justin Muturi has now published the Limited Liability Partnership (Beneficial Ownership Information) Regulations, 2023 targeting to compel LLPs to reveal their beneficial owners.

LLPs are formed by two or more partners, but most partners who seek to hide their ownership from the public eye hire nominee partners to take care of their interests in the partnership.

According to data from the Business Registration Bureau (BRS), LLPs were the second most registered legal entities in the financial year 2022/23 (506), while some 57,025 private limited companies were registered during the period.

“A limited liability partnership shall give notice to a person it knows or has reasonable cause to believe that the person is its beneficial owner, requiring the person to provide the particulars set out in regulation 4,” say the regulations.

The regulations come months after President William Ruto signed into law the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2023.

The push for declaration of beneficial owners of companies and now LLPs is aimed to support the government’s anti-money laundering efforts as well as fighting rampant graft especially in the public sector.

A significant number of LLPs are law firms, which are critical players in the financial dealings of companies and individuals, making them an important cog in dealing with graft and money laundering.

Read: Stepping up money laundering war

It is this position that saw Members of Parliament (MPs) pass an amendment in 2021 that designated advocates, notaries and other independent legal professionals as reporting entities for dirty cash dealings.

However, lawyers moved to court and blocked the implementation of the provision by the Financial Reporting Centre (FRC), arguing that it violated the “advocate-client privilege.”

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