1.The Assets Recovery Agency (“the Applicant”) has filed forfeiture proceedings against the 1st and 2nd Respondents vide an Originating Motion dated 16th December 2020 supported by an affidavit sworn by CPL Fredrick Muriuki on 16th December 2020. The Application is brought under the provisions of Section 90 and 92 of the Proceeds of Crime and Anti-Money Laundering Act and Order 51 Rule 1 of the Civil Procedure Rules.
2.The Applicant seeks the following orders:a.Thatthis honourable court be pleased to issue an order declaring that the funds held by the Respondents in the following accounts are proceeds of crime and are therefore liable for forfeiture to the Government of Kenya:a.Kshs. 25,813,581.07 held in account number xxxx at Equity Bank in the name of Jaruh Supplies.b.Kshs. 13,570,114.32 held in account number xxxx at Equity Bank in the name of Butah Technologies.c.Kshs. 10,053,937.60 held in account number xxxx at Equity Bank in the name of Cailytech Solutions.d.Kshs. 4,722,147.15 held in account number xxxx at Equity Bank in the name of Sinatab Agencies.e.Kshs. 1,575,981.84 held in account number xxxx at Equity Bank in the name of Five Zone Traders.b.Thatthis Honourable Court be pleased to issue an order declaring that the funds held by the 2nd Respondent in the following accounts are proceeds of crime and therefore liable for forfeiture to the Government of Kenya:a.Kshs. 31, 799, 692.85 held in account number xxxx at Equity Bank in the name of Sinatab Agencies.b.Kshs. 1,286,813.80 held in account number xxxx at Equity Bank in the name of Famotech Supplies.c.Thatthis Honourable Court be pleased to issue an order that funds in prayers 1 and 2 are forfeited to the Government of Kenya.d.Thatthis Honourable Court do issue an order that the funds forfeited in prayers 1,2 and 3 above be deposited into account number xxxx at Kenya Commercial Bank, KICC Branch in the name of the Assets Recovery Agency on behalf of the Government of Kenya.e.Thatthis Honourable Court makes any other ancillary orders as it may deem fit and just for proper and effective execution of the above orders.f.Thatthere be no orders as to costs.
3.The Application is based on the grounds stated on the face of the application, the supporting and further affidavit dated 20th December 2021 abridged as below:
4.The Applicant avers that the 1st and 2nd Respondents are businessmen; the 1st Respondent owns 5 business entities registered as business names: Jaruh Supplies, Butah Technologies, Cailytech Solutions, Sinatab Agencies, Five Zone Traders, while the 2nd Respondent owns 2 business entities registered as business names: Stekmo Enterprises and Famotech Supplies. The entities operate the following bank accounts, the subject of these proceedings:a.Account Number xxxx in the name of Jaruh Supplies at Equity Bank.b.Account Number xxxx in the name of Butah Technologies at Equity Bank.c.Account Number xxxx in the name of Cailytech Solutions at Equity Bank.d.Account Number xxxx in the name of Sinatab Agencies at Equity Bank.e.Account Number xxxxin the name of Five Zone Traders at Equity Bank.f.Account Number xxxx in the name of Stekmo Enterprises at Equity Bank.g.Account Number xxxx in the name of Famotech Supplies at Equity Bank.
5.The Applicant avers that they received information on 17th July 2020 on suspected complex money laundering schemes and proceeds of crime involving public funds, from inter-alia the Office of the President, Ministry of Defence, Ministry of Interior and Coordination of National Government, the National Treasury and Planning. The Applicant obtained orders dated 17th July 2020 to investigate and restrict debits from the afore-stated accounts vide Chief Magistrates Court in Miscellaneous Criminal Application No.1904 of 2020.
6.The Applicant avers that their investigations revealed massive suspicious cash deposits and withdrawals from the Respondents' bank accounts and traced a total of Kshs. 316,522,236.00, out of which Kshs. 55,735,761.98 was held in the 1st Respondent’s accounts while Kshs. 33,086,506.65 was held in the accounts of the 2nd Respondent.
7.The Applicant’s case is that on diverse dates between December 2014 and July 2020, the 1st Respondent received suspicious funds from Government Ministries and State Agencies totaling to Kshs. 269,737.936.55/- while the 2nd Respondent received Kshs. 48,684,300.15/- which funds would be withdrawn in cash in split transactions in alleged concealment of the nature, source, location, disposition or movement of the funds.
8.The Applicant’s main contention is that the Respondents colluded with officials of government Ministries and State Agencies, namely the National Treasury, State Department of Water, Immigration, Ministry of Defense, and The Presidency in the award of tenders over a long period between December 2014 and July 2020 and that the tender payments were withdrawn in cash. The Applicant drew tables to illustrate the total sum transacted by the business entities which cumulated into the following sums:a.Account Number xxxx in the name of Jaruh Supplies at Equity Bank received Kshs. 77,194,554.25b.Account Number xxxx in the name of Butah Technologies at Equity Bank received Kshs. 43,436,743c.Account Number xxxx in the name of Cailytech Solutions at Equity Bank received Kshs. 78,191,280d.Account Number xxxx in the name of Sinatab Agencies at Equity Bank received Kshs. 15,279,788.80e.Account Number xxxx in the name of Five Zone Traders at Equity Bank received Kshs. 49,245,181f.Account Number xxxx in the name of Stekmo Enterprises at Equity Bank received Kshs. 47,396,886.35g.Account Number xxxx in the name of Famotech Supplies at Equity Bank received Kshs. 1,287,413.80
9.The Applicant avers that the Respondents were requested for proposals and awarded several tenders through collusion with government officials and that the ultimate beneficiaries were concealed to date. They produced 3 payment vouchers in respect of the tenders awarded to Jaruh Supplies by the National Treasury in respect of LPOs No. 9090, 9741 and 9087. They also produced a payment voucher for LPO no 9541 in favor of Cailytech solution, a payment voucher for LPO no 9348 in favor of Five Zone Traders, payment voucher for LPO no 9345 in favor of Tryvon ventures, and a payment voucher for LPO no 9347 in favor of Stekmo enterprises.
10.The Applicant avers that one Chris Sammy Mutinda is the registered proprietor of Samtech Toner Stationers & Supplies, Syokwaa Auto Suppliers, Tryvon Ventures and Chrisom Investments to whom the 1st and 2nd Respondents wired funds.
11.They aver that they were issued with preservation orders in respect of the subject matter on 18th September 2020 vide High Court Miscellaneous Civil Application No. E019 of 2020, Assets Recovery Agency vs Ruth Nyambura James and Stephen Musyoka Kinyamasyo. The preservation order was gazetted by the Applicant on 18th September 2020 vide Gazette Notice No. 7074 Vol. CXXXII- No. 169 under Section 83 of the Proceeds of Crime and Anti-Money Laundering Act.
12.Ultimately, the Applicant avers that there are reasonable grounds to believe that the subject bank accounts received and are holding funds that are proceeds of crime, the accounts used in possible money laundering.
Response by the 1st Respondent
13.The 1st Respondent opposes the Application vide her replying affidavit sworn on 25th May 2021.
14.The 1st Respondent admits that she is the sole proprietor of 5 business entities: Jaruh Enterprises, Butah Technologies, Cailytech Solutions, Sinatab Agencies and Five Zone Traders. She contends that she is an enterprising youth and registered her businesses with Access to Government Procurement Opportunities (AGPO) to benefit from the government policy of awarding 30% of its tenders to Youth, Women and Persons with Disabilities.
15.She avers that her businesses are legitimate and has supplied various goods to different government ministries such as the National Treasury, Ministry of Interior and Coordination of National Government, Ministry of Transport Infrastructure, Housing, Urban Development & Public Works, Ministry of Defence and Nairobi Metropolitan Services. She averred that her businesses were above board and produced copies of Local Purchase Orders, delivery notes, invoices and receipts for the respective ministries.
16.She confirms the bank balances in her bank accounts to be as stated by the Applicant and avers that the funds were payment for items she had fully delivered as per the Local Purchase Orders. That none of the government entities has ever complained on loss of funds in any matter whatsoever in respect of the Local Purchase Orders and that the payment was made in ordinary course of business. That she is fully compliant with her tax obligations and was issued with tax compliance certificates for her businesses.
17.She avers that she obtained some of the goods on credit due to delays in payment and sent the funds to her suppliers as soon as she was paid. That she also withdrew cash to pay her outstanding loans and to facilitate her travel to oversees. That she complied with the Central Bank Prudential Guidelines which require that she provides documentation before transaction any amounts over Kshs. 1,000,000. That she retained the substantial amounts in her bank accounts and the sole aim of the Applicant is to dispossess her of her hard-earned funds. That her transactions were above board and she fully complied with the investigations. She prayed that the court dismisses the application and her accounts are unfrozen to allow her to continue with her businesses.
Response by the 2nd Respondent
18.The 2nd Respondent similarly opposed the Application vide his replying affidavit dated 25th May 2021.
19.The 2nd Respondent’s testimony is similar to that of the 1st Respondent; he avers that he is the owner of Stekmo Enterprises and Famotech Supplies and as an enterprising youth, registered his businesses with AGPO. That he has done genuine business with the National Treasury, Ministry of Interior and Coordination of National Government, Ministry of Transport Infrastructure, Housing, Urban Development & Public Works, Ministry of Defence and Nairobi Metropolitan Services.
20.The 2nd Respondent contends that all the payments into the businesses bank accounts were for legitimate business that he has transacted with various bank entities and produced copies of notifications of awards for tenders, LPOs, delivery notes, invoices and delivery notes.
21.He confirms that the funds in the two bank accounts for Stekmo Enterprises and Famotech as stated by the Applicant and contends that all his dealings with the government have been genuine and he received clean payments not connected in any manner with proceeds of crime. That he is fully compliant with tax obligations and possesses tax compliance certificates for his businesses.
22.He contends that he received goods from his suppliers on credit and obtained loans from the 1st Respondent and the reason why he transferred some of the monies to her. That he delivered all the items and there is no compliant on irregular procurement. He avers that he complied with the Central Bank of Kenya Prudential Guidelines in respect of transactions of Kshs. 1,000,000 and cash withdrawals.
23.He contends that the Application is full of conjecture and all allegations which have not been proved and cannot form a basis for forfeiture to the government of Kenya. That he is not involved in money laundering and the Application is not supported by an iota of evidence. He prayed that the Application be dismissed and his accounts be unfrozen.
Submissions by the parties
24.The Applicant submits that it seeks forfeiture of funds in various accounts held in various bank accounts by the respondents. Preservation orders were granted on 9th September 2020 and gazetted on 18th September 2020 vide gazette notice no. 7074 vol. XXII no. 169. They propound that the main issue for determination is: whether the funds held by the various entities of the respondents are proceeds of crime.
25.The Applicant submits that the funds subject of these proceedings are proceeds of crime. They referred to their supporting affidavit and submit that they have provided the records of accounts of the said entities showing deposits from various state agencies and thereafter withdrawal in large sums whose destination is unknown. The funds which total Ksh. 316,522,236/= were acquired through collusion within those departments and as such the respondents through those business entities have been engaging in money laundering.
26.They submit that Jaruh Supplies received over Ksh. 77,000,000 million out of which Ksh. 25,813,581.07 has been preserved by orders issued by this court. Butah received a total of Ksh. 43,436,7423 of which the account holds Ksh. 13,570,114.32. For that account, investigations have shown that Ksh. 3.6million was withdrawn within 8 days. The amounts were drawn in a structured way to avoid the reporting requirement at Section 44 of the Proceeds of Crime and Anti-Money Laundering Act. As for Sinatab Agencies, the entity received Ksh.15,279,788.8 of which Ksh.4,722,147.15 have been preserved by this court. Cailytech received Ksh.78,191,280 of which Ksh.10,053,937.6 has been preserved by this court.
27.The other Respondents Butah Technology received 43,476,743 of which 13,517,114 is preserved. Five zone received Ksh.45,245,181 of which Ksh.1,575,981.84 has been preserved. Stekmo Enterprises received Ksh.47,496,886.35 out of which 31,799,692.85 is preserved. Famotech supplies received Ksh.1,287,413.80 and Ksh.1,286,813.80 has been preserved. They contend that these entities were used to channel funds to the owners who are still unknown due to the complex nature in which the respondents operated the accounts and withdrew large quantities.
28.They urge the court to be guided by ARA versus Muthoni Wanja Mbogo where the court held that money and assets are not plucked from the air or fruits from a tree. The respondent contends they have been doing business with the government and attached several delivery notes. However, there are several inconsistencies in the supplier’s alleged dates of delivery and the persons who received the goods. The applicant also established through investigations that the 1st respondent has tax liabilities of Ksh.14,795,400/= bringing into question the validity of the tax compliance certificates annexed.
29.Regarding the 2nd respondent, they submit that investigations established that he has tax debts of Ksh.472,460/= also bringing into question the validity of the tax complaint certificate which was annexed. See ARA versus Pamela Aboo (2018) eKLR
30.Lastly, the Applicant submits that the respondents should have sought affidavits supporting the deliveries and the withdrawals which they claimed were being sent to the suppliers. They pray that this court grants the applicant the orders sought to deny the respondents from enjoying the fruits of their collusion with unknown persons within the agencies that facilitated the payments. That the companies invited to request tenders were related to the respondents and the tender proceeds were sent to individuals to beat the reporting thresholds. We urge you to forfeit the funds.
Submissions by the 2nd and 3rd Respondents
31.Both filed responses are dated 25th May 2021. The crux of the applicant's case is based on unsubstantial claims and insinuations of money laundering without providing evidence.
32.The 2nd Respondent admits that she is the owner of the five companies and that she registered them to benefit from the government policy of awarding tenders 30% to women, youth, and persons with disability. She confirmed that she is doing genuine business with the government and produced corresponding local purchase orders, delivery notes, and invoices to the respective LPOs and certificates of compliance from Kenya Revenue Authority. They submit that they had tender awards, delivery notes, and invoices to those LPOs, and the funds cannot be proceeds of crime.
33.They submit that the applicant insinuates that the respondents received Kshs 316,522,226 at once, yet these businesses existed as far back as 2016. That the applicant insinuates that withdrawal in cash is a crime when it is not.
34.They submit that the burden of proof still lies with the Applicant as POCAMLA did not amend Section 108 of the Evidence Act. That the applicant has not told the court whether the people who received payments were interviewed to confirm the purpose of those funds. That there is no evidence of money laundering as the respondents legitimately traded with the government.
35.They submit that the Respondents applied for tenders and were awarded and there is evidence they received LPOs, delivered, and were paid. They submit that if ARA was a person they would conclude they are jealous and that the investigator Cpl. Muriuki did not do a good job.
36.They submit that they have demonstrated that the funds can be traced from various sources including government ministries and agencies. On the certificates of compliance, they submit that the applicants were keen to pull a fast one on the respondents by writing to KRA way after they had served them with replying affidavits. Nonetheless, KRA confirmed that the 1st Respondent only had a tax liability for the year 2020 due to the freezing of his accounts in 2020. The 2nd respondent had a tax liability of Ksh.472,476 for the year 2020 for a similar reason. That they had no tax liability for the years they were doing legitimate business.
37.Lastly, they submit that payment through mobile banking is commonplace and does not make the transactions illegal. That the Applicant did not do a good job in this case otherwise they would not be here today. They did not verify with the department of immigration to find out if the goods were delivered. Whether for instance, Mr. Ratemo worked there. This is an application fit for dismissal. The documents speak for themselves so the respondents need not have obtained affidavits
Issues for determination
38.The following issue arise for determination:a.Whether the monies in the bank accounts subject of these proceedings are proceeds of crime and if so whether the monies should be forfeited to the State.
Whether the monies in the bank accounts subject of these proceedings are proceeds of crime and if so whether the monies should be forfeited to the State
39.The Applicant seeks to forfeit to the Government of Kenya the assets subject of these proceedings under the provisions of Sections 90 and 91 of the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA). The crux of the case is that the Respondents are alleged to have received a disproportionate number of tenders awarded due to collusion with officials from government ministries.
41.Therefore, in making a forfeiture order, the court is called upon to make a finding on whether the subject matter is intended for use in the commission of an offence or is proceeds of crime within the meaning of Section 2 of the Proceeds of Crime and Anti-Money Laundering Act. The said Section 2 defines proceeds of crime as follows:
42.A preliminary issue contested by the parties is who bears the burden of proof? It is trite that he who alleges must prove. Section 107 (1) of the Evidence Act Cap 80 provides that: “Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts must prove that those facts exist”. This law is read concomitantly with Section 109 of the Evidence Act:
43.In civil forfeiture suits as in this instance, the legal burden lies with the Applicant to prove that the suit properties are proceeds of crime under Section 92 of the Proceeds of Crime and Anti-Money Laundering Act and it remains constant throughout the proceedings. However, once the legal burden is discharged, the evidential burden shifts to the Respondents to explain how they lawfully came into possession of the funds.
44.This court arrived at a similar finding in Assets Recovery Agency v Ali Adbi Ibrahim  eKLR concurred with the decision in Assets Recovery Agency vs Pamela Aboo: EACC Interested Party  eKLR and held thus:
45.It is not disputed that the origins of the preserved funds is various government entities and emanate from the procurement of goods and services. The 1st Respondent is alleged to have received dubious payments from government entities amounting to approximately Kshs. 269,737,936.55 between the period starting December 2014 to 16th July 2020, while the 2nd Respondent is alleged to have received more than Kshs. 48,684,300.15 between the period starting July 2017 to July 2020. The funds were allegedly deposited and withdrawn in cash from the various accounts subject of these proceedings save for the amounts preserved by the order of this court issued on 9th September 2020, to wit Kshs.55,735,761.98 for the 1st Respondent and Kshs.33,086,506.65 for the 2nd Respondent. According to the Applicant, these funds are believed to be proceeds of crime intended for use in money laundering.
46.However, from a holistic review of the affidavits and documents on record the allegation by the Applicant is not persuasive. It is not alleged that the goods for which the funds were paid were not delivered as contracted. On their part, the Respondents have to their respective affidavits annexed documents which give details of the procuring entities, the Local Purchase Orders, invoices delivery notes which bear the stamps of the procuring entities, including the Director of Immigration Services, State Department of Public Works, and Director National Registration Bureau. There is no evidence at all that the tenders were awarded in collusion with officers form those entities.
47.In my view, if the source of the money that the Respondents transacted in was legal, then the assets, funds or proceeds derived from that source are legal. Differently put, there was nothing to be washed or laundered because the money was legal or clean. The source of funds was not disguised, it has been disclosed to be the respective government ministries and state agencies, pursuant to contracts for supply of goods including toners, stationery and office furniture. The critical elements of money laundering as provided in Section 2 of the Proceeds of Crime and Anti-Money Laundering Act.
48.The Applicant has in addition not provided any evidence of irregular/unlawful procurement practices or collusion with government agencies as would entitle this court to find that the preserved funds are proceeds of crime. While even circumstantial evidence would have sufficed none was tendered in this case. The evidence of the Applicants include, inter alia, bank statements from page 59 to 138, Request for Quotations from page 147 to 222, payment vouchers, delivery notes and inspection certificates by the National Treasury at page 139 to 189 of the supporting affidavit. All the documents complete with stamps from the government ministries are an indication of the actual procurement and delivery of services by the Respondents. The authenticity of those documents was not challenged and there is no evidence of unlawful conduct in regard to the transactions. It is not enough for the Applicant to throw allegations as the court. It must prove those allegations.
49.The contention that payment through mobile money and cash withdrawals is an indicator of money laundering is in this case unsupported by evidence. There is no suspicious activity report from any of the reporting institutions that the Respondents transacted with nor is there an allegation of a breach of the National Payment Systems Act 2011, which regulates mobile money transfers. It follows therefore that the Applicant has failed to discharge its legal burden to prove on a balance of probabilities that the funds subject of these proceedings are proceeds of crime. The contention that the 1st Respondent has tax liabilities for the year 2020 for income tax and VAT is remote from the issue of money laundering. Indeed, the 1st Respondent has explained that the subsisting preservation orders in respect of her bank accounts freezing all the monies therein impeded her payment of taxes for the year 2020.
50.In my view, the Respondents have sufficiently explained, in addition to the documents filed by the Applicants herein that the funds are from legitimate sources duly earned through the supply and delivery of goods to the afore stated government agencies. Whereas one might wonder at how the respondents managed to get all these tenders there is no evidence of breach of the Public Procurement and Disposal of Assets Act that would warrant this court to come to the conclusion that the funds are proceeds of crime hence liable to forfeiture. Accordingly, the originating Motion is dismissed but with no orders as to costs. The preservation orders shall be lifted and the funds restored to the Respondents.