Asset Recovery Agency v Vyes

[5]. Examination of the money gram revealed that the respondent received only a sum of Kshs. 524,525 from the Republic of Korea from one Choon Soo Kim. Therefore, the respondent deposited a sum of Kshs. 1,090,326 which he declared to be his personal cash at hand. [6]. The investigator is questioning; where an unemployed person would get personal cash of over a million in a day- a question yet to be answered by the respondent. [7]. Investigations showed that the respondent is unemployed and has no known source of income. When he was called upon to explain the sources of the money, his explanations were not satisfactory. [8]. Two days later, he deposited a further sum of Kshs. 1,430,000 in three batches and declared the money to be proceeds of sale of a motor vehicle. He attached a sale of motor vehicle agreement between him and one Jean Nzoche & Jajecla Ltd at a consideration of Kshs. 1,500,000. The motor vehicle subject of the said sale agreement was registration number KAT 468Z. [9]. Investigation on the vehicle established that the vehicle did not belong to the respondent. It belonged to Rosemary Wangui Waweru and Industrial. Credit Bank Limited. [10]. In order to conceal the illegality, he substituted the car sale agreement with another between his wife and Namu Cars Limited for sale of motor vehicle registration number KCY 625S whose purchase price was indicated to be Kshs. 800,000. [11]. Based on the investigations, the investigator concluded that the respondent was a fraud as he was purporting to transfer a motor vehicle he does not own to unsuspecting buyer. Thus, the proceeds of the transactions are proceeds of crime and ought to be forfeited to the state. [12]. Investigations further revealed that the money was not proceeds of sale of motor vehicle KCY 625S because there was no movement of money from the purchaser to the buyer at all. And, the purported buyer has refused to record a statement with the applicant on the

page 2 of 17

source of the money in issue. Therefore, the source of the money deposited on 4th April, 2023 is unknown and unexplained by the respondent, thus, proceeds of crime and ought to be forfeited. [13]. The respondent was also receiving large sums of money from individuals in Korea whom he claimed were his future business partners. From the money gram examined, he was receiving a sum of Kshs. 400,000 from Korea in a span of two days apart, making it more than one million in a week. [14]. The frequency in which the funds were received, is suspicious and the legitimacy of the money is also not explained. [15]. The explanations given of these huge receipts and deposits into his account was that, the money is for his personal upkeep. However, the debits were minimal as compared to the credits and there was not a single transaction showing payment for domestic utilities. The tenancy agreement he provided provides for an account number for payment of rent, yet, no money ever moved from the respondent’s accout to the said rent account. [16]. The affidavit by the Koreans identified as Yeon Soo Kim to support the transfer of the funds, states that he is a director of a Korean Company known as Space Dream together with two other individuals. The certificate of incorporation provided was neither certified nor does it bear the name of the Korean friends as director or representatives of the company. In any event, the funds being sent to Kenya are not shown to be coming from the Korean company to the respondent. [17]. It has been argued that, investigations revealed that, from the bank statements of the respondent’s account, the respondent has been depositing over 100,000 every day-it depicts clear fraudster and a person dealing in money laundering by a person, yet, unemployed. He has not explained the sources of the money. [18]. The transactions involving the respondent are typical of money laundering activities. The transactions and legal sources of the money, have also not been explained to the court.

page 3 of 17

[19]. The applicant therefore argued that, it has proved that the sums herein are proceeds of crime and ought to be forfeited to the state. Respondent’s case [20]. The respondent filed a replying affidavit as well as list of documents dated 27th December, 2023. They also filed submissions to elucidate upon his averments. [21]. According to the respondent, the orders sought by the applicant to restrict his account at Post Bank Limited were in the guise of investigating a suspected case of money laundering. [22]. The respondent listed as ‘Facts not disputed’ the following: i) ii) That he received the funds in question as donations; He is not facing any investigations or charges for any known offence in Kenya or South Korea law; iii) The donors are not facing any investigations or charges for any known offence in Kenya or South Korea law; iv) He is the holder of the account at Post Bank Limited. [23]. In his view the issues for determination are: i) What constitutes proceeds of crime? ii) Whether or not the gifts and donations to the respondent constitute proceeds of crime iii) Whether the applicant is entitled to the orders sought. [24]. The respondent cited the definition of proceeds of crime in section 2 of POCAMLA. He also stated that the burden of proof that property is proceeds of crime rests with the applicant on a balance of probabilities. He cited the case of Kanyungu Njogu vs. Daniel Kimani Maingi [2000] eKLR and Miller vs. Minister of Pensions [1947] 2 All ER 372. [25]. The respondent urged that the applicant has not discharged the burden of proof as required under section 107 of the Evidence Act

page 4 of 17

that the funds he received are proceeds of crime. He cited the case of ARA vs. Ali Abdi Ibrahim [2022] eKLR. [26]. As such, the respondent claimed that the evidential burden did not shift to him to explain anything. Nonetheless, he went into great length in his replying affidavit dated 27 th December, 2023, to explain that there is nothing suspicious or questionable about the fund he received as they were accompanied by funds declaration forms. [27]. He termed as ludicrous the argument by the applicant that by making deposits of less than Kshs. 1,000,000, he was engaged in money laundering; as he deposited what he had. [28]. He explained the mix-up of agreements when he supplied the wrong agreement to the bank. But, he subsequently, rectified the mix-up and supplied the correct agreement for sale of his wife’s car. He accused the investigator for not disclosing that when he appeared before them, he was with his wife who confirmed about the sale of her vehicle by the respondent and that the proceeds of Kshs. 800,000 was paid. On this basis, he considers this case as founded purely on conjecture and wild allegations. [29]. He stated that he provided money grams to prove the donations by his friends in South Korea, and backed the huge cash deposits into his account with receipts, fund declaration forms, a notarized affidavit in South Korea, proof of residence and income sources of his friends in South Korea. [30]. In sum, the respondent believes that he has proved beyond reasonable doubt that his sources of funds are lawful, legitimate and devoid of any suspicion. [31]. On his part, there is no offence on donations nor any limit thereof where the intentions are pure. Limit of donations is by the donor’s ability only. [32]. He went on. That, the applicant did not prove that the respondent was part of a criminal engagement or arrangement; he

page 5 of 17

knew that he was facilitating crime; or intends to commit any crime of facilitating commission of crime. He relied on the case of Ex Parte Patrick Ogola Onyango & 8 Others [2016] eKLR. [33]. In distinguishing the case of ARA vs. Ali Abdi Ibrahim (supra), the respondent stated that he has explained that these funds were given to him as donations by his friends to support him as they knew he was out of work, in bad health and with a sickly and pregnant wife and was under pressure to provide for his family’s basic necessities. [34]. On that basis, the respondent concluded that the applicant has not proved the funds he received are proceeds of crime, and forfeiture order should not issue. He prayed for the application to be dismissed with costs. ANALYSIS AND DETERMINATION Nature of proceedings [35]. Civil forfeiture is a ‘civil proceeding’ (s.81(1) of POCAMLA), to which ‘rules of evidence applicable in civil proceedings shall apply’ (s.81(2) 0f POCAMLA). Therefore, inter alia, the civil standard of proof applies to civil forfeiture proceedings; on a balance of probabilities (s.92 of POCAMLA). [36]. However, it has been argued that, since the cause of action is founded on commission of crime or criminal conduct, the standard of prof should be towards the upper limits of the balance of probabilities. The burden of proof rests with the applicant. But. as preponderant weight of evidence is adduced, evidential burden shifts to the person who would fail if no further evidence is adduced. Evidential burden is the basis for explanations sought in forfeiture law of the respondent. These explanations constitute what is commonly known as rebuttal evidence. [37]. Shifting of evidential burden is fact and evidence based. For instance, merely stating that you have business partners without providing details that will enable the applicant to pursue the leads,

page 6 of 17

does not ipso facto shift the burden back to the applicant. Similarly, if you fail to offer the explanations including the sources of the money and the purpose of the money, to the satisfaction of the court, the evidential burden is not discharged. What the applicant must prove [38]. Under section 92 of POCAMLA: The High Court shall, subject to section 94, make an order applied for under section 90(1) if it finds on a balance of probabilities that the property concerned — (a) has been used or is intended for use in the commission of an offence; or (b) is proceeds of crime. [39]. In the case of Kenya Anti-Corruption Commission v Stanley Mombo Amuti [2017] eKLR the court held: - “This is a claim for civil recovery. A claim for civil recovery can be determined on the basis of conduct in relation to property without the identification of any particular unlawful conduct. The Plaintiff herein is therefore not required to prove that the Defendant actually committed an act of corruption in order to invoke the provisions of the ACECA. In the case of Director of Assets Recovery Agency & Ors, Republic versus Green & Ors [2005] EWHC 3168, the court stated that: “In civil proceedings for recovery under Part 5 of the Act the Director need not allege the commission

page 7 of 17

of any specific criminal offence but must set out the matters that are alleged to constitute the particular kind or kinds of unlawful conduct by or in return for which the property was obtained.” I opine that forfeiture is a fair remedy in this instance as it serves to take away that which was not legitimately acquired without the stigma of criminal conviction. Criminal forfeiture requires a criminal trial and conviction while civil forfeiture is employed where the subject of inquiry has not been convicted of the underlying criminal offence, whether as a result of lack of admissible evidence, or a failure to discharge the burden of proof in a criminal trial.”. [40]. For purposes of civil forfeiture, the requirement; ‘has been used or is intended for use in the commission of an offence’ or ‘proceeds of crime’ does not necessarily require proof of any particular offence as in a trial. Except, however, the applicant ‘must set out the matters that are alleged to constitute the particular kind or kinds of unlawful conduct by or in return for which the property was obtained.’ [41]. The applicant stated through its investigator, Mohammed Hussein, that, upon investigations on and analysis of the account of the respondent, established that i) The statements of the account show, funds being deposited in cash in clusters of below one million shillings in a single day. The cluster deposits need not be declared as large deposits under the anti-

page 8 of 17

money laundering regulations, thus, it was impossible to establish the source of the funds from the bank documents. ii) The clustered deposits were numerous amounting to huge sums of money, yet, the respondent was not employed and had no known sources that would generate that kind of money in a single day. In the circumstances, the transactions were suspicious and characteristic of money laundering. iii) That, the respondent was called upon to explain the sources of the funds on several occasions, but he only honoured their summons only once, but, still he failed to substantiate the sources of the funds. iv) That, the respondent had provided the bank with an agreement for sale of a motor vehicle registration number KAT 628T; he was indicated to be the seller, yet, the registered owners were Rosemary Wangui Waweru and National Industrial Credit Bank Limited. He purported to transfer a vehicle that did not belong to him as part of his justification of huge cash deposit into his account. v) That, when he was confronted with the information, he substituted the agreement with another for alleged sale of motor vehicle KCY 625S belonging to his wife. But, he still nothing shows and he did not show any money moving from the supposedly buyer to the respondent to prove the money deposited in the account actualy was out of the sale of the vehicle.

page 9 of 17

vi) That the applicant summoned the supposed buyer of the vehicle on several occasions to record a statement to confirm that the funds were paid by him to no avail, and the respondent made no effort whatsoever to make the supposed buyer record the statement. vii) That, the bank statement shows that on the material day he allegedly sold his wife’s vehicle, he deposited a sum of Kshs. 1,430,000, yet, the supposed sale price was Kshs. 800,000. The respondent was not able to explain even the difference given the fact that he had deposited a total of Kshs. 1,176,458 into the same account two days earlier whose source was also not explained. viii) That, his wife recorded a statement with them and she stated that she had the money deposited in the account of the respondent so that it does not mix with her business money. Nevertheless, she had bought the vehicle using funds from her business and not from the respondent’s account. ix) That, his explanations that the funds were from his friends in Korea was not substantiated and the documents he supplied were written in Korea language and were not interpreted. Nothing including the certificate of registration provided, showed the so-called friends and senders of the funds, Seong Se Kim and Choon Soo Kim were directors of the Space Dream company in Korea. Investigations concluded these individuals were strangers to the said company.

page 10 of 17

x) That, the affidavit by Yeon Soo Kim is signed by him alone yet, it states that he and his partners had sent USD 33,160 xi) That, his explanation that the funds were for his personal upkeep, and medical help coming from friends in Korea is not supported as nothing showed payments of domestic utilities or medical bills from the account. The account was for money laundering. xii) That, the alleged donors are also said to be his business partners; but, have not proved the funds are legitimate or from legitimate sources. The respondent has also proved the sources of the money are legitimate. xiii) That the applicant summoned the respondent several times to furnish them with contact details of the said Korean business partners to no avail. xiv) The respondent has been living in Kenya for the longest time and a certificate of good standing from his country may not explain or capture his activities in Kenya. xv) They were of the firm view that, the funds were proceeds of crime or intended for use in commission of crime in Kenya and in outside jurisdictions. They sought its forfeiture. [42]. The respondent in the replying affidavit as well as the submissions filed argued that, the applicant’s venture to his account at Post Bank Limited is merely in guise of investigating a suspected case of money laundering. [43]. The respondent admitted that he received the money in question but as donations and gifts from his friends. He claimed that neither he nor his friends are facing any criminal charges in respect of the

page 11 of 17

money. He stated that he provided evidence of the persons who were giving him donations. [44]. He also claimed that he has explained the mix-up of the motor vehicle sale agreement and provided proper sale agreement to support source of the funds in question. [45]. In his view the issues for determination are: iv) What constitutes proceeds of crime? v) Whether or not the gifts and donations to the respondent constitute proceeds of crime vi) Whether the applicant is entitled to the orders sought. [46]. The respondent urged that the applicant has not discharged the burden of proof as required under section 107 of the Evidence Act that the funds he received are proceeds of crime. He cited the case of ARA vs. Ali Abdi Ibrahim [2022] eKLR. [47]. As such, the respondent claimed that the evidential burden did not shift to him to explain anything. Nonetheless, he went into great length in his replying affidavit dated 27 th December, 2023, to explain that there is nothing suspicious or questionable about the fund he received as they were accompanied by funds declaration forms. [48]. In sum, the respondent believes that he has proved beyond reasonable doubt that his sources of funds are lawful, legitimate and devoid of any suspicion. [49]. On that basis, the respondent concluded that the applicant has not proved the funds he received are proceeds of crime, and forfeiture order should not issue. He prayed for the application to be dismissed with costs. Analysis

page 12 of 17

[50]. The investigations herein reveal that the respondent is unemployed. He received huge amounts of money and made huge cash deposits; some lumpsum and majority in clustered deposits of less that one million shillings in the same day. Money laundering is a complicated affair which is done ingeniously by individuals to conceal the illicit origin of the money or the illicit use of the money to commit crimes. This is done through complex designs, financial transactions, money transfers, purchases etc. most used channels for money laundering are financial institutions, money and equity markets, construction, hawara systems. [51]. It is not therefore strange that the applicant established that the respondent was receiving huge sums of money and depositing them in cash into the bank account at Post Bank Limited in a manner that is structured and clustered to suppress any regulatory declaration. [52]. The respondent dismissed this finding as ludicrous; as you deposit what you have. This is too simplistic, especially given the fact that he was making clustered deposits in a single day amounting to over one million shillings. [53]. The frequency and amount of the deposits in a single day are indicative of pretence and calculated to portend compliance with regulatory requirements, yet, the real intention was to avoid declaration requirements which require supporting documents; as to the source and purpose of the funds. The applicant therefore has established on a balance of probabilities that, the incidents on the receipt of funds and the manner the deposits in this case were made, are typical money laundering activities through the account at Post Bank. [54]. Further grounding; in respect of huge deposit he made, investigations revealed that the respondent had provided to the bank a sale of vehicle agreement in respect of a vehicle registration number KAT 468T which did not belong to him, but to third parties; Rosemary Wangui Waweru and National Industrial Credit Bank

page 13 of 17

Limited. He subsequently, substituted the sale agreement with another for sale of his wife’s vehicle registration number KCY 625S. [55]. His explanations that this was a mix-up by his lawyer is not convincing and does not explain why he had made an agreement for sale of a vehicle that belonged to third parties. This aspect was not explained in the ‘mix-up’ story. The court agrees with the applicant that this was an act of fraudster and attempt to provide supporting document to hoodwink the bank and financial scrutiny of his activities. [56]. The substitute sale agreement of supposed sale of his wife’s vehicle is in furtherance of these dishonest schemes, and was intended to cure the lapse arising from realization that the vehicle he purportedly sold belonged to third parties. [57]. His wife also recorded a statement and it emerged that she purchased the vehicle in question using her business funds, which runs counter to the argument that the sale price was deposited in the respondent’s account so that it does not mix with her business money. [58]. Concerning the donations, it is true that a person may be given donations and gifts by friends and philanthropists. But, in banking the gifts and donations should adhere to anti-money laundering regulatory requirements. The sources and purpose of the huge gifts and donations must be supplied. These interventions by law are aimed at combating serious offences of money laundering, illicit financial flows. Corruption and economic crime etc which are also highly transboundary. And, nations have shown indomitable resolve to fight these crimes as was stated in the case of ACEC MISC APPL. NO. E023 OF 2023 [2024] eKLR that: The court expressed of the serous nature and effects of these offences, whilst maintaining a proportioned balance between the rights of the

page 14 of 17

applicant and public interest in asset forfeiture and combating of these crimes as follows: Therefore, the need for proportioned balance between the constitutional rights of the respondent, on the one hand, and public interest in the recovery or forfeiture of illicit assets or proceeds of crime as a way of combating crime, in this case, corruption, economic crime and money-laundering, on the other. These are serious organized, and transboundary crimes which have caused the world and nations, severe migraine, and huge prompting, economic leakages international, and social squeeze, regional and national concerted focus and efforts through tools such as United Nations Convention against Corruption, United Nations Convention against Transnational Organized Crime, African Union Convention on Preventing and Combating Corruption, to mention but a few (EACC vs. Daniel Mnywoki Wambua [2024] eKLR). [59]. In the same case, the court expressed much trepidation thus: Regrettably, Kenya is one of the latest countries to be placed on the Financial Action Task Force’s (FATF) grey list which is an indictment of the country’s ability to effectively tackle financial crimes especially moneylaundering, economic crimes, terrorism financing and proliferation financing. The effects of such listing on the citizens of Kenya is not a trifle, as may be subjected to arbitrary declarations and due diligence checks when they visit or travel to other jurisdictions. [60]. The evidence by the applicant is that there is no information that the source of money was legitimate. The applicant sought help from the respondent to provide contact details of the Korean friends to no avail. The certificate of registration of Space Dream provided does not prove the legitimate source of the funds remitted to the

page 15 of 17

respondent which were huge amounting to USD 33,176- according to the Yeon Soo Kim affidavit which he swore ostensibly for himself and other partners. Their authority is not exhibited to that effect. [61]. Also these funds were not shown to be funds of Space Dream company or that the object or one of the objects of the company as per the constitution of the company was philanthropy or charitable giving or donation giving which justify such expenditure by the company to an individual; the respondent in particular. [62]. Evidence also show that, the respondent’s claim that the huge donations and gifts were for his personal domestic use and medical needs is not supported by evidence such as money moving from the account towards payment of his domestic utility bills or medical bills. The explanation is hollow and unsubstantiated. [63]. In the upshot, the applicant has proved on balance of probabilities that the funds herein were proceeds of crime and or were intended to commit money crimes in Kenya of concealing the sources of illicit funds. The explanations by the respondent are not satisfactory and do not show the source or legitimacy of the funds. [64]. In accordance with section 92 of POCAMLA, the funds are therefore, proceeds of crime, and are forfeited to the state. The said funds shall be transferred to the applicant’s account for forfeited funds. [65]. The respondent shall bear the costs of the application. [66]. The court considered the application by the applicant for contempt of court order claiming that Post Bank Limited released the funds under preservation order to the respondent. Accordingly, in light of the seriousness of money laundering offences and the banks’ role in preventing illicit financial flows and money laundering, the court directs the following: i) The Bank shall appear through the appropriate personnel in enforcement or top management before the court on a date to be appointed by the

page 16 of 17

court to show cause why they should not pay the money forfeited to the state; and ii) During all such attendances, the respondent shall also attend before court in person. iii) Depending on the decision of the court in (i) above, the court shall enter a personal judgment against the respondent for the forfeited sum for enforcement against and attachment of any other property of the respondent. [67]. The respondent shall bear the costs of these proceedings. [68]. Orders accordingly. Dated and delivered at Narok through Microsoft Teams online application this 15th day of July, 2024 --------------------------F. Gikonyo M, Judge In the presence of: Ms. Amadi for the applicant Kamweti for the respondent Respondent Raymond C/A

page 17 of 17