Kenya on the Spot as Global Watchdog Retains Country on ‘Grey List’ Over Terrorism Financing Gaps
Kenya will remain on the Financial Action Task Force’s (FATF) increased monitoring list, commonly known as the ‘grey list’, after the global money laundering and terrorism financing watchdog found the country had not fully addressed all action items from its initial evaluation. The decision, announced after the FATF’s plenary session in Paris, means Kenya must continue to demonstrate progress in strengthening its frameworks to combat the flow of illicit funds to terrorist groups. This retention signals to the global financial community that significant risks persist within Kenya’s anti-money laundering (AML) and counter-terrorism financing (CTF) regimes.
The FATF’s initial greylisting of Kenya in February 2023 highlighted several strategic deficiencies. Key among the unmet action points are the need for more effective and risk-based supervision of financial institutions and designated non-financial businesses and professions (DNFBPs), and the enhancement of the Financial Reporting Centre’s (FRC) capacity to analyze and disseminate financial intelligence. While Kenyan authorities, including the National Treasury and the Central Bank of Kenya (CBK), have pointed to recent legislative amendments and increased seizures of illicit cash as signs of progress, the FATF determined that these measures have not yet produced a sufficient level of effectiveness and compliance with international standards.
The continued grey-listing poses tangible economic threats to Kenya, potentially increasing the cost of international transactions and complicating cross-border trade and investment. This status makes us a less attractive destination for foreign capital, as international banks and investors are mandated to apply enhanced due diligence to jurisdictions on the list, explained a Nairobi-based financial analyst who sought anonymity. It also complicates the financial operations of Kenyan citizens and businesses with international ties, who may face heightened scrutiny and delays in processing transactions with correspondent banks abroad.
Looking forward, the Kenyan government has reiterated its commitment to working with the FATF to expedite its exit from the list. The National Treasury has pledged to fast-track the implementation of the remaining action plan items, which includes conducting comprehensive national risk assessments and ensuring that law enforcement agencies are effectively investigating and prosecuting complex money laundering and terrorism financing cases. The speed and effectiveness of these reforms will be critical in the next FATF review, as a prolonged stay on the grey list could have deepening negative consequences for Kenya’s integration into the global financial system.