Kenya’s Grey Listing by FATF: A Setback for Economic Progress and Global Reputation

Date: March 7, 2024

Kenya Faces International Scrutiny after FATF Grey Listing

On February 23, 2024, the Financial Action Task Force (FATF) included Kenya in its grey list due to persistent issues with money laundering and terrorism financing. This development has generated international concerns and negatively impacted Kenya’s economic standing and global reputation. Let’s examine the reasons behind Kenya’s inclusion in this list.

The FATF Assessment: Identifying the Deficiencies

1. Lack of Prosecution: The FATF assessment revealed significant issues with prosecuting money laundering and terrorist financing offenses in Kenya. No successful investigations or prosecutions for these crimes have been reported.
2. Unregulated NPO Sector: Kenya’s large sector of Non-Profit Organizations (NPOs) remains largely unregulated, increasing the risk of terrorism financing abuse.
3. Low Recovery Rates: The recovery rate from fraud, forgery, and drug-related offenses is relatively low compared to misuse of resources and corruption.

Improvement Areas for Kenya

To address these deficiencies, the following areas require improvement:

1. Prosecution of Money Laundering Offenses
2. Terrorist Financing
3. NPO Sector Regulation
4. Recovery Rates
5. Beneficial Ownership Disclosures
6. Enhanced Due Diligence for Politically Exposed Persons (PEPs)
7. Virtual Assets and VASPs
8. Risk-Based Supervision

Consequences of Kenya’s Grey Listing

The effects of Kenya’s grey listing extend beyond the nation’s borders:

1. Loss of Foreign Aid and Investments
2. Increased Compliance Costs
3. Obstacles in International Trade and Payments

Necessary Recommendations

To combat financial crime in light of Kenya’s greylisting, the following recommendations are crucial:

1. Stakeholder Engagement
2. Judicial Independence and Capacity Building
3. Operationalization of the PBO Act
4. Enhanced Prosecution of High-Profile Cases
5. Collaboration between Law Society of Kenya & Financial Reporting Centre

Conclusion

Kenya’s grey listing by FATF highlights the need for comprehensive reforms to strengthen its Anti-Money Laundering/Counter-terrorist financing framework. Through collaborative efforts among government agencies, civil society, and international partners, Kenya can enhance its compliance with global standards and restore confidence in its financial institutions.

Contact:

Gerald Omumbo +254703247825 gomumbo@tikenya.org

Dennis Kabia +254714317550 dkabia@gfintegrity.org