Financial Crime World

KENYA’S FINANCIAL CRIME PROSECUTION STRATEGIES UNDER SCRUTINY AS COUNTRY IS GREY-LISTED BY FINANCIAL ACTION TASK FORCE

Kenya’s Recent Inclusion in the FATF Grey List Sends Shockwaves Through the Country

Kenya’s recent inclusion in the Financial Action Task Force’s (FATF) grey list on February 23, 2024, has sent shockwaves through the country, threatening its economic and social progress. This development is a significant setback for Kenya, which had previously been commended for its efforts to combat financial crime.

Lack of Clear Strategy on Prosecution of Money Laundering Offences

According to the FATF assessment, Kenya lacked a clear strategy on the prosecution of money laundering offences. The country failed to conduct adequate investigations and prosecutions of terrorist financing offenses, despite conducting several investigations related to terrorism.

  • Key findings:
    • No successful investigations or prosecutions of money laundering cases
    • Insufficient investigation and prosecution of terrorist financing offenses

Concerns over Lack of Regulation in Non-Profit Sector

The grey listing also highlighted concerns over Kenya’s lack of regulation in its non-profit sector, which is a significant risk for terrorism financing abuse. The National Risk Assessment (NRA) conducted by Kenya found that fraud, forgery, and drug-related offences posed the greatest risk to the country, but recovery from these crimes was low.

  • Key findings:
    • Lack of adequate regulations in the non-profit sector
    • High-risk activities such as fraud, forgery, and drug-related offenses

Other Areas of Concern

Kenya’s grey listing also highlighted concerns over:

  • Beneficial ownership disclosures: not all companies and entities had complied with the requirement to disclose their real owners
  • Identification of Politically Exposed Persons (PEPs) and their transactions: opaque due to a lack of Enhanced Due Diligence procedures required for such persons when conducting transactions domestically
  • Risk-based approach towards anti-money laundering/counter-terrorist financing supervision: underdeveloped, with most supervisory activities focused on banks and microfinance banks

Consequences of Grey Listing

Kenya’s grey listing has significant consequences for the country, including:

  • Increased scrutiny and enhanced due diligence from foreign banks and financial institutions
  • Delays, higher transaction costs, and possible restrictions on cross-border trade and payments

Urgent Action Required to Combat Financial Crime

To combat financial crime, civil society organizations are calling for urgent action to address several key areas, including:

  • Involving stakeholders in the fight against anti-money laundering/counter-terrorist financing
  • Upholding the independence of the judiciary
  • Operationalizing the Public Benefit Organisations Act
  • Enhancing prosecution of high-profile cases
  • Fostering collaboration between relevant agencies

A Wake-Up Call for Kenya

Kenya’s grey listing serves as a wake-up call for the country to strengthen its anti-money laundering/counter-terrorist financing framework and restore confidence in its financial institutions. Through collaborative efforts among government agencies, civil society, and international partners, Kenya can enhance its compliance with global standards and protect its economy from the scourge of financial crime.

Signed:

  • Global Financial Integrity (GFI)
  • Transparency International Kenya (TI-Kenya)
  • Civil Forum for Asset Recovery (CiFAR)
  • African Forum and Network on Debt and Development (AFRODAD)
  • Institute of Public Finance
  • Kenya Human Rights Commission (KHRC)