Kenya grey listed for dirty cash flow in money laundering war

Kenya has again been put under high watch for not having strong safeguards against the flow of dirty cash, joining 23 other countries in a list of shame known as the ‘grey list.’

On Friday, the Finance Action Task Force (FATF), the global anti-money laundering watchdog, made a decision to put Kenya on the grey list, a move that is likely to hurt Nairobi’s standing as the financial centre of the region.

The grey list refers to countries that have deficiencies in dealing with money laundering and terrorist financing.

Kenya will be under increased scrutiny by the FATF, with the country expected to make critical changes to its financial infrastructure to reduce the risk of being a haven for dirty money.

Kenya, a financial hub in the region, has also been flagged as a regional hub for illicit gold as well as a transit for drug and wildlife traffickers, with law firms, casinos, and real estate agents being highlighted as some of the enablers of money laundering.

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With Uganda removed from the list following recommendations of FATF’s fifth plenary meeting, Kenya now joins Tanzania and South Sudan in the grey list. Other African countries on the list include Nigeria, South Africa, Mali, Mozambique, Burkina Faso, Senegal and Cameroon.

The downgrade means Kenya might be subjected to stricter due diligence when dealing with the rest of the world, with far-reaching impact to the economy, including difficulty in securing funding and reputation damage.

This is a blow to the government which had made several amendments in a bid to forestall the damning rating.

Read: Kenya seeks higher rating in fight against dirty cash

The National Treasury in a statement confirming that Kenya had been placed on the ‘grey list’ explained that it had made several amendments to laws against money laundering and terrorism financing including the AML/CFT (Amendment) Act, 2023.  

“We wish to address the recent development concerning Kenya’s status with the Finance Action Task Force (FATF). 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 Treasury Cabinet Secretary Professor Njuguna Ndung’u.

“This underscores the imperative for swift and comprehensive action to bolster our compliance efforts. It is important to note that Kenya underwent an assessment conducted by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) in 2022. The evaluation revealed a mixed picture.”

A 2022 mutual assessment report by a regional anti-money laundering watchdog identified several strategic deficiencies in its framework for the fight against dirty cash.

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The evaluation by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) found Kenya to be ‘partially compliant’ with the global standards on anti-money laundering and terrorism financing.

Prof Ndung’u was however optimistic that the latest rating would not impact the country’s economy negatively.

“While there are still strategic deficiencies that require urgent attention, Kenya remains fully committed to implementing the FATF Action Plan comprehensively and expeditiously,” he said.

“We will review the progress made to date and develop a comprehensive strategy to address remaining deficiencies. Adequate resources will be allocated to ensure timely compliance and exit from the grey list.”

He said that the National Treasury is actively engaged in the process and anticipates minimal effects on the country’s financial stability and the costs of conducting business in Kenya.

Nevertheless, the government remains vigilant and committed to managing domestic ML/TF/PF risks effectively, he added.

In 2010, FATF placed Kenya on a list of high-risk countries for delays in enacting laws to tackle criminal financial activity as well as a failure to track money laundering. It was removed from the list four years later.

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