Blow as Kenya fails test in money laundering fight

National Treasury and Economic Planning CS Njuguna Ndungu. [Samson Wire, Standard]

Kenya has been placed on the grey list of the global anti-money laundering body, the Financial Action Task Force (FATF).

This means the country is under FATF scrutiny for lacking strong structures to combat money laundering and terrorist financing.

Treasury Cabinet Secretary Njuguna Ndung'u acknowledged FATF’s move saying it requires swift and more action to strengthen Kenya's compliance efforts.

"Kenya has officially been placed on ‘grey list’ indicating enhanced monitoring to ensure compliance with international Anti-Money Laundering, Countering the Financing of Terrorism and proliferation of Weapons of Mass Destruction (AML/CFT/CPF)," said Ndung'u.

Kenya is back on the list after ten years of a clean bill of health, and now joins 23 other countries worldwide on the list of shame.

The move could have far-reaching consequences for Kenya as a regional financial centre, as it indicates the country is a playground for illicit money flows.

Kenya may face difficulties in securing foreign funding as investors and financial institutions will exercise more caution in their dealings, which could ultimately hurt the economy.

Its reputation could also be damaged, as it could be seen as a home for money launderers and facilitators of terrorist financing.

The FATF will be paying close attention to Kenya, expecting it to strengthen institutions to reduce the flow of this illicit money.

Kenya is a member of the FATF through the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which is an associate member of the FATF.

CS Ndung'u called on the European Union (EU), the United States (US) and the United Kingdom (UK) to assist Kenya in strengthening its institutions to combat money laundering.

"We seek the support of our international partners, including EU, UK and US for whom we have been discussing Technical Assistance Support, to facilitate support to develop capabilities for capacity diverse actions and instruments in this dynamic environment," he said.

According to the CS, cooperation and technical assistance from the partners will help improve Kenya's ML/TF framework to strengthen the regulatory institutions for delisting.

Ndung'u said Kenya will do everything possible to address the red flags raised by the ESAAMLG, including allocating more resources to ensure timely compliance and removal from the grey list.

The Financial Reporting Centre (FRC), Kenya's agency mandated to identify and combat money laundering and terrorism financing cited Kenya as a haven for drug and wildlife traffickers to move their products and launder their proceeds.

According to the agency, casinos, law firms, hawala and real estate agencies are high-risk areas that it suspects are being used to launder dirty money.

Lawyers will be required to report their clients' suspicious transactions to the FRC from March 15, 2024, after the Anti-Money Laundering and Combating of Terrorism Financing (Amendment) Bill, 2023 comes into force.

FRC Director General Saitoti Maika said the country should also regulate Bitcoin given its wide adoption and use in the country and the world.

Kenya is one of the leading countries in the cryptocurrency space.

Neighbouring Uganda was removed from the list after getting a clean bill of health, but could slide back in if it does not continue to strengthen institutions to fight money laundering.

Other African countries on the grey list include South Sudan, Tanzania, Mali, Nigeria, South Africa, Mozambique, Burkina Faso, Cameroon and Senegal.

Somalia has been blacklisted and is one of four countries in the world on the list, the others being North Korea, Iran and Myanmar.