Central Bank of Kenya – Guidance on Beneficial Ownership (BO)

Acronyms and Key Terms

Core Abbreviations
- AG – Attorney General
- AML – Anti-Money Laundering
- BO – Beneficial Ownership
- BRS – Business Registration Service
- CEO – Chief Executive Officer
- CDD – Customer Due Diligence
- CBK – Central Bank of Kenya
- CFT – Combating the Financing of Terrorism
- CPF – Countering Proliferation Financing
- EDD – Enhanced Due Diligence
- ESAAMLG – Eastern & Southern African Anti-Money Laundering Group
- FATF – Financial Action Task Force
- FI – Financial Institution
- FRC – Financial Reporting Centre
- FXB – Foreign Exchange Bureau
- ML – Money Laundering
- POCAMLA – Proceeds of Crime & Anti-Money Laundering Act
- POCAML Regs. – Proceeds of Crime & Anti-Money Laundering Regulations $2013$ (as amended)
- RBA – Risk-Based Approach
- TF – Terrorism Financing

Preliminary Provisions

Title – “Guidance on Beneficial Ownership (BO)”
Application – Applies to FIs licensed under: Banking Act, Microfinance Act, CBK Act, National Payment Systems Act
- Commercial banks
- Mortgage finance companies
- Microfinance banks
- Money-remittance providers
- Foreign-exchange bureaus
- Payment-service providers
- Non-deposit-taking credit providers (formerly digital credit providers)
Authorisation – Issued per Section $36C(1)(d)$ POCAMLA (CBK power to issue AML/CFT/CPF guidance)
Key Definitions
- Beneficiary – Any natural/legal person entitled to trust benefits; may be ascertainable class until accumulation period ends
- Beneficial Owner – Natural person who ultimately (i) owns/controls a customer, (ii) on whose behalf a transaction is conducted, (iii) exercises ultimate effective control; definition extends to settlors, trustees, protectors, beneficiaries, persons with equivalent positions in similar arrangements
- Express Trust – Trust clearly created by settlor (documented)
- Legal Arrangement – Express trust or similar (e.g., fiducie, Treuhand, fideicomiso, Waqf)
- Legal Person – Non-natural entity able to own property/enter relationships (companies, foundations, partnerships, associations, etc.)
- Nominee Shareholder/Director – Acts on nominator’s instructions; never considered BO solely by that role
- Settlor – Transfers assets to trustees
- Trustee – Holds legal title & fiduciary duties per Hague Convention Article $2$

Statement of Policy

Purpose – Guide FIs on implementing statutory BO obligations under POCAMLA & Regulations
Scope – Identification, verification, documentation of BO for domestic & foreign legal persons/arrangements
Responsibility – Board & senior management must craft policy, procedures, controls, internal guidelines & training on BO ID & verification

Background & Rationale

Legal entities perform vital economic roles yet can hide illicit actors/funds
FATF standards require FIs to know & verify BO, including ownership/control structures
Kenya’s BO Legal Framework
- Companies Act $2015$ Section $876$ + Companies (BO Information) Regs $2020$
- Limited Liability Partnerships Act + LLP (BO Information) Regs $2023$
- POCAML Regs:
- Regulation $14$ – CDD obligations, specific subsections: identify customer, identify & verify BO, understand purpose/nature of relationship
- Regulation $22$ – Must identify/verify natural persons behind legal persons/arrangements
Core FI duties re BO:
- Identify natural-person BO & map ownership/control structure
- Take reasonable measures to verify accuracy & keep records
- Risk-profile BO (CDD/EDD, PEP flagging, sanctions, high-risk jurisdictions)

Specific Requirements

4.1 – Entities Covered

Companies limited by shares/guarantee, unlimited companies, foreign companies, limited partnerships, LLPs, trusts (incl. express), co-ops, other corporates

4.2 – Identification of BO in Legal Persons (Cascading Test)

Test $1$ – Ownership
- Natural person directly/indirectly holds >10\% equity or voting rights
Test $2$ – Control by Other Means
- Dominant influence: power to appoint/remove directors, power of attorney, convertible debt, financing leverage, trust agreements, family influence, etc.
Test $3$ – Senior Managing Official
- If Tests $1$ & $2$ fail, identify senior management as BO (e.g., CEO)

Examples (Ownership)

Example $1$ – Company T: A $61\%$ , B $9\%$ , C & D jointly $30\%$ ⇒ BOs: A; C & D jointly (threshold $10\%$ )
Example $2$ – Company E: Mr BB $50\%$ , Company EFG (fully owned by Mr DD) $50\%$ ⇒ BOs: Mr BB, Mr DD
Example $3$ – GHI Ltd: Three companies (owned by Ms J) each $20\%$ , Mr T $20\%$ , Mr A $20\%$ acting as nominee for Mr T ⇒ BOs: Ms J, Mr T

Example (Control by Other Means)

Example $4$ – Company X: Mr A holds all voting rights; Mr B directs board & strategy ⇒ both are BOs (ownership & significant influence)

4.3 – Identification in Legal Arrangements (Trusts etc.)

Must ID & verify: settlor, trustee(s), protector(s), beneficiaries/class, any person with ultimate effective control
Positions indicating control:
- Settlor with revocation power
- Protector who can hire/fire trustees
- Investment manager directing trustee
- Any benefiting person
Obtain & understand trust documents; verify independently (registry, notary)
Example $5$ – Author B creates trust for child; trustee seeks FI relationship ⇒ CDD must cover author B (settlor) in addition to trustee
Example $6$ – Corporate trustee: FI must trace through company & identify natural-person BOs of the corporate trustee

4.4 – Acceptable Documents & Sources (Domestic)

Certificate/incorporation, constitution, minutes, registration forms, by-laws, CRBO extract, shareholder register, articles, resolutions, partnership agreement, trust deed, BO register, annual reports, etc.
Relationship mapping per entity type:
- Companies – shareholders, senior mgmt, persons w/ voting rights, nominee/shadow directors, persons appointing directors
- Partnerships – partners, other controllers
- Clubs/NGOs/Co-ops – office bearers, senior mgmt, controlling members
- Trusts – settlor, trustee, protector, beneficiaries, other controllers
Reasonable Measures – Practical, necessary, risk-based; if unable to obtain/verify foreign BO, record exhaustion of measures & may rely on statutory declaration
CDD Timing – At onboarding & whenever BO info changes; magnitude of scrutiny (CDD vs EDD) follows risk assessment

4.5 – Verification Procedures

Rationale

Promotes transparency, deters ML/TF/corruption/tax evasion, supports governance & law-enforcement

4.5.1 Domestic Legal Persons/Arrangements

Collect BO Info – Names, $ID/Passport$ , DOB, nationality, BRS BO form, CR $12$ , structure charts, share certificates, board resolutions, trust deed, etc.
Identify BOs – $\ge 10\%$ shares/votes, power to appoint majority, executive control positions
Verify – Cross-match docs; validate IDs/passports; reconcile with CR $12$ & BRS filings

4.5.2 Foreign Entities

Request certified foreign docs: incorporation, M&A, trust deed, shareholder register, BO declaration
Determine BOs using Kenyan definition
Collect & certify passports, source-of-funds where EDD needed
Independent checks: foreign registries, commercial databases (Dow Jones, World-Check, Lexis Nexis), open-source
If no reliable independent data, document exhaustion; escalate risk rating; potentially terminate relationship in high-risk cases

4.6 – Record-Keeping

Maintain detailed, auditable records of BO determinations, CDD, reasoning; comply with POCAMLA retention timelines

4.7 – Reporting Discrepancies

Any mismatch between customer-supplied BO data & BRS registry ⇒ file Suspicious Activity Report with FRC

Effective Date

Guidance effective $1\;\text{August}\;2025$

Enquiries

Director, Bank Supervision Department, Central Bank of Kenya
- P.O. Box $60000 – 00200$ NAIROBI
- Tel: $+254!\text{-}20!\text{-}2860000$
- Email: fin@centralbank.go.ke