[2022] KEHC 10024 (KLR)

Assets Recovery Agency v KKS (Anti-Corruption and Economic Crimes Civil Suit 2 of 2020) [2022] KEHC 10024 (KLR) (Anti-Corruption and Economic Crimes) (9 June 2022) (Judgment)

Neutral citation: [2022] KEHC 10024 (KLR)

Republic of Kenya

In the High Court at Nairobi (Milimani Law Courts)

Anti-Corruption and Economic Crimes

Anti-Corruption and Economic Crimes Civil Suit 2 of 2020

EN Maina, J

June 9, 2022

Between

Assets Recovery Agency

Applicant

and

KKS

Respondent

Judgment

Introduction 1. The Assets Recovery Agency/Applicant filed the Originating Motion dated 17th January 2020 which is supported by the affidavit of Tobias Abondo, Superintendent of Police at the Directorate of Criminal Investigations, Banking Fraud Investigations Unit. The Motion is brought under Sections 81,82,90,92 and 120 of the Proceeds of Crime and Anti-Money Laundering Act and Order 51 of the Civil Procedure Rules and seeks the following orders:“1) That this Honourable Court be pleased to declare funds of Kshs. 6,430,662. 90 in account number 2023------ and Kshs. 10,668,357. 25 in account number 2022------ both held at Barclays Bank Kenya, Diani Branch in the name of KKS are proceeds of crime and therefore liable for forfeiture to the State.2) That the Honourable Court be pleased to issue orders of forfeiture of funds of Kshs. 6,430,662. 90 in account number 2023------ and Kshs. 10,668,357. 25 in account number 2022------ both held at Barclays Bank Kenya, Diani Branch in the name of KKS.3) That the forfeited funds of Kshs. 6,430,662. 90 in account number 2023------ and Kshs. 10,668,357. 25 in account number 2022------ held at Barclays Bank Kenya, Diani Branch in the name of KKS be deposited in a/c no. 1240------ held at the Kenya Commercial Bank, KICC branch in the name of the Assets Recovery Agency.4. That the Honourable Court makes any other ancillary order it may deem fit for the Cornelia proper, fair, effective execution of these orders.”

2. The Application is premised on grounds inter alia, that“a) The Applicant is the Assets Recovery Agency established under Section 53 of the proceeds of Crime and Anti-Money Laundering Act (POCAMLA) as a body corporate with the mandate of identifying, tracing, freezing, seizing and recovering proceeds of crime.b) Section 81, 82, 90, 92 & 120 of the POCAMLA, authorizes the agency to institute Civil Forfeiture proceedings to recover proceeds of crime.c) The Federal Republic of Germany made a request for Mutual Legal Assistance, to secure assets and take measures to prevent the Respondent and her husband Mr. HAS from disposing assets registered in their name in Kenya vide a note verbal No. 85/2014 dated 27th February, 2014. d) The respondent herein, KKS and the husband HAS are accused persons/suspects in respect to the offence of commercial breach of trust and aiding and abetting breach of trust in accordance with Sections 266 Subsection (1), sub section (2), 263 subsection (3), No. 1, 27 of the German Criminal Code.e) The Respondent herein was specifically suspected of committing the offence of aiding and abetting commercial breach of trust in a multitude of cases in accordance with the Section 265 subsection (1) subsection (2) 253 subsection (3), 2nd sentence No. 1, 27 subsections (1) and 53 of the German Criminal Code.f) The Government of the Federal Republic of Germany had undertaken investigations and amounts of approximate 250,000 Euros had been transferred in connection with the offence to banks in Kenya identifiably the Barclays bank of Kenya in respect to two accounts and the Imperial Bank of Kenya in respect t to one accountg) In the decision dated 1st August, 2013 by the Munich local Court which issued the freezing order; it is apparent the Respondent’s husband, Mr. HAS worked as a freelance accountant for [particulars withheld]; where he managed the cash in hand, granted advances, made bank transfers and booking and checking of statements.h) The respondent’s husband is charged with drawing up fictitious invoices from suppliers and couriers to [particulars withheld]; entering the items in a payment programme; changed the original bank account details of the alleged creditors by entering his own bank account details or those of his wife (the respondent herein)i) The husband would then authorize the transfers using online banking with the PINS and TANs in his possession. The sum transferred was identical to the original entries in the payment system. The Respondent herein (Mrs. S) specifically allowed her husband to use her account to deposit and then jointly use the money illegally obtained.j) Investigations further identified and traced assets belonging to the Respondent which are reasonably suspected to be proceeds of crime.k) There exists a court order preserving the funds in the subject matter of this application in Misc. Criminal application No. 155 of 2014 in the Criminal Division of the High Court.l) on 18th September, 2019, the Agency obtained preservation orders, which were subsequently gazette on 4th October, 2019 vide gazette notice Vol. CXXI-No. 132 pursuant to Section 83 of the POCAMLA.m) The applicant is entitled under POCAMLA to trace, identify and make an application for forfeiture of proceeds of crime.n) unless this Honourable Court grants the orders sought, the economic advantage derived from the commission of crimes will continue to benefit a few to the disadvantage of the economy and to the public.o) there is sufficient evidence and reasonable grounds to believe that the funds in the identified bank accounts held in the Respondent’s name are proceeds of crime liable for recovery by the Applicant under POCAMLA.p) there attaches an international obligation for every state to combat laundering of proceeds of crime by proper implementation of their national domestic laws and which this court is now called upon to implement.q) Kenya is obligated under international connections and domestic law to honour mutual legal requests to combat laundering of proceeds of crime.”

3. The supporting affidavit of Superintendent Tobias Apondo echoes the aforestated grounds and adds that unless this court grants the orders sought, the economic advantage derived from the commission of crimes will continue to benefit a few to the disadvantage of National Security, the economy and the general public.

4. In the written submissions dated 24th February 2022, Learned Counsel for the Applicant reiterated the grounds of the application, the supporting affidavit and further affidavit and submitted that the suit presents two issues for determination: what is the legal status of the Mutual Legal Assistance Request dated 17th October 2013 from the Federal Republic of Germany and whether the funds subject of the Application are proceeds of crime and liable for forfeiture.

5. Counsel stated that the dual criminality principle under Section 120(1)(a) of the Proceeds of Crime and Anti-Money Laundering Act has been established; that the note 85/2014 dated 27th February 2014 and the attachments thereto which comprise the decision dated 1st August 2013, the order from the Munich Local Court and the attachment orders in rem both dated 1st October 2013 are final as there is no appeal or order setting them aside; That the Respondent is accused of aiding and abetting commercial breach of trust in a multitude of cases in accordance with Section 266(1) (2) 263(3), Sentence No. 1, 27 (1) a 53 of the German Code which law is similar to Section 20(1) (c) of the Penal Code which provides:“20. Principal offenders(1) When an offence is committed, each of the following persons is deemed to have taken part in committing the offence and to be guilty of the offence, and may be charged with actually committing it, that is to say—(a)every person who actually does the act or makes the omission which constitutes the offence;(b)every person who does or omits to do any act for the purpose of enabling or aiding another person to commit the offence;(c)every person who aids or abets another person in committing the offence;(d)any person who counsels or procures any other person to commit the offence, and in the last-mentioned case he may be charged either with committing the offence or with counselling or procuring its commission.(2)A conviction of counselling or procuring the commission of an offence entails the same consequences in all respects as a conviction of committing the offence.(3)Any person who procures another to do or omit to do any act of such a nature that, if he had himself done the act or made the omission, the act or omission would have constituted an offence on his part is guilty of an offence of the same kind, and is liable to the same punishment, as if he had himself done the act or made the omission; and he may be charged with doing the act or making the omission.”

6. Counsel submitted that the Request for Mutual Legal Assistance from the Federal Republic of Germany conforms with the provisions of Sections 23 and 24 of the Mutual Legal Assistance Act and that the protection of the right to property under Article 40 of the Constitution does not extend to property that is unlawfully acquired.

7. Counsel argued that these proceedings are civil in nature and the burden of proof is on a balance of probabilities; That the proceedings are not dependent on the outcome of criminal proceedings in respect of an offence with which the property is concerned and the fact therefore that the Respondent was acquitted is immaterial; that the funds in issue constitute property or economic advantage derived or realized as a result of an offence in the Federal Republic of Germany and fall within the definition of money laundering under Sections 2, 3 and 4 of the Proceeds of Crime and Anti-Money Laundering Act which criminalize money laundering. Counsel stated that the Respondent was in cahoots with her husband in the transfer of the illegally obtained funds into her ABSA account, formerly Barclays Bank domiciled here in Kenya. To buttress her submissions Counsel cited the case of Assets Recovery Agency v Fisher, Rohan and Miller, Delores, Supreme Court of Jamaica, Claim No. 2007 HCV003259 which was affirmed by this court in Assets recovery Agency v Quorandum Limited & 2 others [2018] eKLR

8. Counsel also submitted that the evidential burden of proof lies with the Respondent to demonstrate how she acquired the funds, which she has failed to do; that the Applicant has discharged its burden on a balance of probabilities and the Application is merited. Counsel cited the case of Assets Recovery Agency v Pamela Aboo; EACC (Interested Party) [2018] eKLR and Kenya Anti- Corruption Commission v Stanley Mombo Amuti [2017] eKLR in support.

The Respondent’s case 9. The Respondent opposed the application through her replying affidavit sworn on 7th March 2022 where she averred that the Applicant obtained preservation orders in respect of the subject bank accounts and detained her motor vehicles KBS ---C and KBR ---L in the year 2014 pending investigations; that she was discharged by the German Government from [particulars withheld] department and no charges were preferred against her; that it is now 7 years since the preservation orders were made yet there has been no progress in the investigations and no charges were brought against her.

10. The Respondent further averred that the Applicant’s conduct is injurious to her; that the funds in the accounts were her savings from her employment at [particulars withheld] Company where she was earning a monthly salary of 85,000 which she saved for use in her old age. She contends that the Applicant has no right to recover the funds; that she is being victimized and that she is currently ailing and suffering with no source of income, surviving only through well-wishers.

11. In the written submissions dated 7th March, 2022, learned Counsel for the Respondent submitted that the Applicant has failed to meet the legal burden of proof placed upon it under Section 107 of the Evidence Act; that the onus is on the Applicant to prove that the subject monies are proceeds of crime as defined under Section 2 of the Proceeds of Crime and Anti-Money Laundering Act; that the burden does not shift to the Respondent and that the evidence adduced by the Applicant only implicates the Respondent’s spouse who committed crimes in Germany and there is no nexus between these crimes and the funds in the Respondent’s accounts. Counsel cited the cases of Eastern Produce (K) Ltd Chemomi Tea Estate v Bonfas Shoya [2018] eKLR and Mbuthia Macharia v Annah Mutua Ndwiga & another [2017] eKLR.

12. Counsel further stated that the funds should not be forfeited since the Applicant has not provided enough evidence to justify grant of the order; that the applicant has not disclosed the particulars of fraud, allegedly perpetrated by the Applicant and that the Agency’s evidence comprises foreign documents whose makers are not witnesses and therefore that evidence cannot be tested through cross examination. Further, that this case is based on mere suspicion and speculation and there is no offenses known in law that have been proved by evidence.

13. Counsel reiterated that the subject funds were savings from the Respondent’s salary; that it is not illegal to carry out cash transactions through a foreign bank account given there are checks and balances within banking institutions to regulate such transactions. Counsel asserted that the impending forfeiture without a conviction would be in breach of the rights of the Respondent under Article 40 of the Constitution; that the Applicant has failed to establish a connection between the funds and the alleged offences and the funds are therefore not proceeds of crime and the application should be dismissed with costs.

Issues for determination 14. There is no doubt and indeed it is not disputed that Kenya received a note verbal No. 85/2014 dated 27th February 2014 which is a request for mutual legal assistant. The request is sanctioned by Section 8(1) of the Mutual Legal Assistance Act. The jurisdiction of this court to confiscate proceeds of crime is derived from Section 23 of the Mutual Legal Assistance Act which states: -“23(1) Kenya shall assist in proceedings involving the identification, tracing, freezing, seizure and confiscation of the proceeds and instruments of crime under its laws or any other arrangement to which Kenya may be bound in relation to a requesting state.(2) A request for legal assistance under this section shall include—(a)details of the property in relation to which co-operation is sought;(b)the connection, if any, between the property and the offences in respect of which the request is made;(c)where known, details of any third party interests in the property; and(d)a certified copy of the freezing or seizing decision or final decision of confiscation made by a court.(3) Nothing in this section shall prejudice the rights of bona fide third parties.

15. No doubt therefore that this court has the requisite jurisdiction to hear and determine the application before it and the only issue for determination:- Whether the sum of Kshs. 6,430,662. 90 in the Respondent’s account number 2023------ and Kshs. 10,668,357. 25 in her account number 2022------ both held at ABSA previously known as Barclays Bank Kenya, Diani Branch in the name of Kornelia Kerstin Schaller are proceeds of crime and therefore liable for forfeiture/confiscation as prayed in the application.

Analysis and determination 16. What constitutes proceeds of crime is defined as follows in Section 2 of the Proceeds of Crime and Anti-Money Laundering Act:-“2. proceeds of crime” means any property or economic advantage derived or realized, directly or indirectly, as a result of or in connection with an offence irrespective of the identity of the offender and includes, on a proportional basis, property into which any property derived or realized directly from the offence was later successively converted, transformed or intermingled, as well as income, capital or other economic gains or benefits derived or realized from such property from the time the offence was committed.”

17. In the Mutual Legal Assistance Act, 2011 proceeds of crime is defined in the following terms:“2. Proceeds of crime" includes any property, benefit or advantage that is wholly or partly obtained, derived or realized directly or indirectly as a result of the commission of a criminal act or omission.

18. The justification for that very wide definition was interpreted as follows by the court in the case of Schabir Shaik & Others –vs- State Case CCT 86/06(2008) ZACC 7 cited with approval in the case of Assets Recovery Agency v Lilian Wanja Muthoni t/a Sahara Consultants & 5 others [2020]:-“........one of the reasons for the wide ambit of the definition of “proceeds of crime” is, as the Supreme Court of Appeal noted, that sophisticated criminals will seek to avid proceeds being confiscated by creating complex systems of “Camouflage”

19. The Federal Republic of Germany through a verbal note 85/2014 dated 27th February 2014 requested for Mutual Legal Assistance in the preservation of funds transmitted through bank accounts of the Respondent and her husband HAS domiciled in Kenya. Between 1/1/2008 to 1/8/2013 at the material time, the Respondent and her husband were found by the Munich Local Court vide a decision dated 1/8/2013 to have obtained approximately 3,860,507. 14 Euros through false pretenses and breach of trust. The subject funds were placed in the custody of the Kenya Police through an order obtained by the Office of the Director of Public Prosecutions in Kenya through HC CR Misc. Criminal Application No. 155 of 2014 HAS and KKS v Republic. The funds were subsequently preserved by this court by an order dated 18th September, 2019 issued HC ACEC Misc. Civil Application No. 40 of 2019 Assets Recovery Agency v KKS. The Respondent has however contended that she has since been absolved of the guilt by an acquittal in the cases before the Federal Republic of Germany. It is also her contention that as she has not been charged in Kenya with any related offences or at all the funds cannot be forfeited.

20. It is trite that that in civil forfeiture, the subject of inquiry is whether or not the funds are proceeds of crime. It is not an inquiry into the character or conduct of the Respondent or any specific criminal offences or charges against them as contended by the Respondent. This law is stated in Section 92 of the Proceeds of Crime and Anti-Money Laundering Act:92. Making of forfeiture order(1)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.(4)The validity of an order under subsection (1) is not affected by the outcome of criminal proceedings, or of an investigation with a view to institute such proceedings, in respect of an offence with which the property concerned is in some way associated......” (Emphasis mine)

21. In the case of Director of Assets Recovery and Others, Republic v Green and Others [2005] EWHC 3168 cited with approval in the case of Assets Recovery Agency v Pamela Aboo: EACC (interested party) (supra) the court stated:“In civil proceedings for recovery under part 5 of the Act the Director need not allege the commission 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.”See also the case of Assets Recovery Agency v Charity Wangui Gethi & another[2021] eKLR where Mumbi J, as she then was, stated:-“186. Section 92(4) of POCAMLA provides that:-(4) The validity of an order under subsection (1) is not affected by the outcome of criminal proceedings, or o an investigation with a view to institute such proceedings, in respect of an offence with which the property concerned is in some way associated.187. It is my finding therefore and I so hold that the issuance of a forfeiture order in this matter is not dependent on whether or not anyone is ever convicted in relation to the fraudulent transfer of funds from the NYS. The 1st respondent has not been able to discharge the burden placed on her to demonstrate the source of the funds deposited in her account, and to displace the Agency’s evidence that shows it was part of the NYS funds. In the face of such failure, there is no refuge that the 1st Respondent can find in alleging that there has been no conviction in relation to the NYS funds.The argument by the Respondent that she was acquitted of the charges in the German Court is therefore not relevant and cannot hold. Neither does her argument that a forfeiture order would be a violation to her right to property I agree with and echo the finding of the court in the case of Pamela Aboo (supra) that:-“65. Forfeiture under POCAMLA is not a violation of an individual right to property. Article 40(6) of the Constitution is clear that rights acquired under article 40 do not extend to any property that is found to have been lawfully acquired.”(See also the case of Assets Recovery Agency v Charity Wangui Gethi & another [2021] eKLR where Mumbi J, as she then was, held:-“188. The last argument made by the 1st Respondent is that the funds at issue belong to her, and she has right to property under Article 40 of the constitution. The right to property is, indeed, guaranteed in the Constitution, and no-one can argue with its being available to all citizens. However, under Article 40(6), property that is found to be unlawfully acquired is not protected. The article provided that:-(6)The rights under this Article do not extend to any property that has been found to have been unlawfully acquired...”

22. Having carefully considered the material placed before me I am satisfied that the applicant has proved on a balance of probabilities the flow of the funds in the respondents account from her husband’s accounts in Germany. Her own husband was convicted of criminal offences in regard to those funds and the funds are therefore proceeds of crime as defined both in the Proceeds of Crime and Anti-Money Laundering Act and in the Legal Mutual Assistant Act.

23. The Applicant having proved its case on a balance of probabilities the evidentiary burden shifts to the Respondent to prove that the funds are not proceeds of crime. This was affirmed in the case of Assets Recovery Agency v Rohan Antony Fisher and others Supreme Court of Jamaica, Claim No. 2007 HC v 00 3259 where the court stated:-“....Even though these proceedings are quasi criminal in nature there is an evidential burden of proof on the defendant. It is incumbent on them to demonstrate evidentially how they lawfully came into possession of the assets seized. Miller for example merely says she worked/works as an higgler but has amassed thousands of United States dollars without more.There is no indication of any work place or higglering or any enterprise on her part. The only reasonable and inescapable inference based on all the evidence, is that the properties seized are properties obtained through unlawful conduct and are therefore Recoverable properties.This court finds Applicants case proved and will make a Recovery Order in respect of the properties seized as per the Freezing order dated the 14th August 2007. This court found that none of the monies from the freezer was the property of Delores Miller nor earned by her. The money was part of the proceeds of the criminal activities of her two sons, Rohan Antony Fisher and Ricardo Fisher and as such are part of the recoverable assets.....”

24. It is my finding that the Respondent has not satisfactorily explained how she acquired the subject funds. Her contention that the subject funds are savings from her salary is not convincing at all. This is because despite her own evidence that she retired in the year 2015 (that is the year in the certificate of discharge from [particulars withheld] which she had annexed her affidavit as “Exhibit “KKSI” She has not explained how she earned the large sums of money. Similarly, the banks statements in respect of account number 2022---- show sporadic credits of large sums into the Respondent’s account on various dates between 01/01/2011 and 27/03/2014 during which period the Respondent’s husband was found to have committed fraud, breach of trust and aiding and abetting commercial breach of trust contrary to Section 265(1), (2) and Section 254(3), Second Sentence No. 1, 27 (1) and 53 of the German Criminal Code.

25. The Respondent has also produced a copy of a Judgment dated 10/12/2014 and argued in her submissions that she is legally divorced from her husband HS. Though not averred in her submissions, the issue of divorce is immaterial to the proceedings as the funds were transmitted in the year 2012- 2013 during the subsistence of the marriage. (The pronouncement of divorce annexed as Exhibits” to her affidavit is dated 10/12/2014. ) The relationship with HS does not dissuade the fact that there subsists a freezing order in rem by the Munich Local Court preserving the funds held by the Respondent and her alleged former husband in the subject bank accounts domiciled in Kenya. Further the Germany Court found that money was being deposited in her German account by her husband which she would then transfer into her Kenyan account.

26. It is my considered view that the Respondent has failed to meet the evidential burden required of her to explain the legitimate source of the subject funds. She has failed to rebut the Agency’s contention that the subject funds are part of the 250,000 Euros that are sought by the Federal Republic of Germany arising from the criminal conduct of her husband. As I have stated that she has been discharged by the authorities in Germany is immaterial. There is established a strong connection between the unlawful conduct of her husband, that is, fraud and breach of trust and the funds subject of these proceedings sufficient to warrant their forfeiture/confiscation.

27. The Republic of Kenya is enjoined under Section 23 of the Mutual Legal Assistance Act to assist a requesting State in investigations, prosecutions and judicial proceedings in relation to criminal matters, including the recovery, freezing, confiscation and disposal of assets that are proceeds of crime.

28. Having found the subject funds of Kshs. 6,430,662. 90 in account number 2023------ and Kshs. 10,668,357. 25 in account number 2022------ both held at Barclays Bank Kenya, now ABSA Bank Diani Branch in the name of the Respondent are proceeds of crime I now hereby make an order that the same shall be and are hereby confiscated and the Central Authority shall be at liberty to proceed as provided in the Mutual Legal Assistant Act. The Respondent is of course entitled to exercise her right of appeal against this judgment.

SIGNED, DATED AND DELIVERED VIRTUALLY ON THIS 9TH DAY OF JUNE, 2022. E N MAINAJUDGE