Financial Crime World

Kenya’s Gray Listing by FATF: A Renewed Call for Improved Cross-Border Financial Regulation

Nairobi, Kenya - The Financial Action Task Force (FATF) has once again placed Kenya on its gray list, a designation that underscores deficiencies in implementing international standards to combat money laundering and terrorism financing.

FATF’s Greylisting: Consequences and Implications

  • Lower investor confidence: The greylisting may deter potential investors due to uncertainty around the regulatory environment.
  • Hindered cross-border financial transactions: Businesses may face increased scrutiny when conducting transactions with Kenyan entities, potentially disrupting trade and commerce.
  • Attractive target for criminal groups: Weak financial regulations make Kenya an attractive target for criminals looking to exploit these weaknesses.

The US Department of the Treasury added 16 entities in Kenya to its Specially Designated Nationals list on March 11 for their links to terror financing. These entities include Kenyan and Somali citizens accused of raising and laundering funds for al-Shabaab, as well as Crown Bus Services for reportedly supporting their operations and logistics.

Efforts to Combat Money Laundering: Challenges and Progress

Despite legislation such as the Proceeds of Crime and Anti-Money Laundering Act (2009), Kenya faces challenges in adhering to these standards. Weak financial oversight allows money laundering activities to persist across various sectors including transport, real estate, legal, non-governmental organizations, and gold.

Vulnerabilities in the Real Estate Sector

  • Fraud and luxury real estate purchases: A 2021 report by The Sentry revealed that corrupt figures in Kenya are using luxury real estate purchases to commit fraud.
  • Illicit cash transactions: Over $544 million in cash entered Kenya illegally through Jomo Kenyatta International Airport between 2021 and 2023. (Source: ESAAMLG assessment report)

Instances of Money Laundering and Terror Financing

  • Undeclared foreign currency: In February 2022, a Kenyan man was arrested at Jomo Kenyatta International Airport for carrying $2 million in undeclared foreign currency.
  • Concealed cash: In November 2021, authorities discovered over $28,000 concealed in a jacket shipped from the United States.
  • Hand luggage: In December 2020, a Nigerian national was arrested by the Assets Recovery Agency with over $754,717 in hand luggage.

The Path to Financial Redemption

To effectively combat money laundering and terrorism financing, Kenya requires a multifaceted approach. This includes:

  • Strengthening oversight: Increase regulatory enforcement from the government, financial institutions, and international partners.
  • Harmonizing laws: Implement measures to improve legal complexities and ensure a consistent framework for financial regulation.
  • Enforcement and partnerships: Collaborate with global counterparts to share intelligence and coordinate efforts in combating financial crimes.

Collaboration and Adaptation: Key to Financial Regulation Improvement

The financial redemption of Kenya is a long and complex journey that necessitates the collective commitment and action of various stakeholders to effectively combat money laundering and terrorism financing.

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