Kenya's draft Trust Administration Regulations 2026 propose restricting access to dividends and proceeds from asset sales for beneficiaries who fail to disclose their identity. The regulations aim to curb money laundering and allow trustees to suspend a person's right to receive distributions or restrict payment of benefits if they do not comply with beneficial ownership disclosure requirements. This move is part of Kenya's efforts to increase transparency in trusts.
The proposed restrictions are part of the implementation of the Trust Administration Act, 2026, which commenced on September 25. The Act seeks to make trusts more transparent in the fight against money laundering and illicit financial flows. The draft regulations provide that restrictions imposed on a non-compliant beneficiary may include suspension of their right to receive distributions, participate in certain trustee decisions, or exercise powers and entitlements under the trust.
The measures could affect beneficiaries who have traditionally received income or other benefits from family wealth held through trusts without their identity being known. Failure to provide ownership information could interrupt access to trust income and other benefits, even where their underlying interest remains intact. The draft requires disclosure of each beneficial owner's name, national identity card, personal identification number certificate, contact details, occupation, postal address, residential address, and relationship with the trust.
The new law requires trusts to maintain information on their beneficial owners and lodge the relevant register with the registrar. The disclosure framework is intended to give authorities better visibility of the people behind trusts, which can be used to hold property, investments, and other assets. This move is expected to make it harder for individuals to hide assets or the ultimate beneficiaries of trusts behind layers of legal ownership.
Prior to the new Act, trusts in Kenya were being governed mainly by the Trustees (Perpetual Succession) Act, which did not compel those registering and overseeing such entities to disclose beneficial owners. The gap had left room for use of such vehicles for money laundering and terrorism financing. The Financial Reporting Centre had flagged the repealed laws as part of the weak link in Kenya’s fight against money laundering and terrorism financing.
Kenya was grey-listed in February 2024 following a 2021 mutual evaluation by the Eastern and Southern Africa Anti-Money Laundering Group, which found gaps in compliance with global standards, including on transparency and beneficial ownership of trusts. The new law and its proposed regulations seek to close this gap by establishing a centralised registration framework and imposing obligations on trustees to identify, verify, and maintain beneficial ownership information.
The draft regulations set out a process that trustees must follow before restricting a beneficiary’s access to trust distributions. A trustee must first issue a notice seeking the required information, followed by a follow-up notice and then a warning notice when no response is received. Only after the beneficiary ignores the warning can the trustee impose restrictions, and they must withdraw these within 14 days after receiving and verifying the required information from the affected person.
Key points
- Beneficiaries who fail to disclose their identity may lose access to dividends and proceeds from asset sales.
- The proposed regulations aim to curb money laundering and increase transparency in trusts.
- The new law requires trusts to maintain information on their beneficial owners and lodge the relevant register with the registrar.
