Kenya’s system in dealing with money laundering, countering the financing of terrorism, and weapons of mass destruction has been put in question by an international crime watchdog.
- The country has been grey listed after an assessment revealed a deficiency and interventions to address the enhanced monitoring of the country’s financial system by the Financial Action Task Force (FATF).
- Kenya underwent an assessment conducted by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) in 2022 which revealed a mixed picture.
- According to Brenda Guchu, Manager, PwC Kenya, being on the grey list sends a message to the global financial system to exercise caution in dealings with the country.
“At this Plenary, the FATF added Kenya and Namibia to the list of jurisdictions subject to increased monitoring,” said the FATF in a statement. The development comes a decade after the FATF removed Kenya from its grey list, to which it had first been added in 2010.
Guchu notes that the raised risk profile has far-reaching economic implications including reduced attractiveness of the country as an investment destination for foreign direct investment, and increased cost of doing business for entities domiciled in the country due to the enhanced due diligence applied by counter-parties.
It might also lead to restrictions on cross-jurisdictional transactions particularly to/from countries that have stringent measures against grey listed countries, potential de-risking by correspondent banks and other key relationships, increased cost of public international debt from finance and development partners among others.
Ongoing Efforts
“This, underscores the imperative for a swift and comprehensive action to bolster our compliance efforts,” noted Njuguna Ndungu, Cabinet Secretary, National Treasury.
“The National Treasury is actively engaged in this process and anticipate minimal effects on the country’s financial stability and the cost of conducting business in Kenya, the government will spare no effort in addressing identified deficiencies and working towards a swift exit from the grey list,” he added.
- Kenya enacted the AML/CFT (Amendment) Act 2023, which involved an overhaul of existing legislation.
- The legislative reform comprised of 17 amendments aimed at addressing various legal and technical compliance deficiencies identified in the evaluation report.
- The government also reviewed the prevention of terrorism (implementation of the United Nations Security Council Resolutions on the Suppression of Terrorism) Regulations, 2022 to align with the amended Act and published the prevention of terrorism regulations, 2023.
In a statement, CS Ndungu noted that all Kenya’s regulatory agencies (Central Bank, Capital Markets Authority, Insurance Regulatory Authority), among others enhanced their AML/CFT risk-based supervision following the new powers provided by AML/CFT amended act.
“We seek the support of our international partners for whom we have been discussing technical assistance support, to develop capabilities for capacity diverse actions and instruments in the dynamic environment.”
Kenya Tightens Money Laundering, Terrorism Financing Rules – Kenyan Wallstreet
