Kenya has taken a significant step towards addressing its money laundering and terrorist financing concerns with the recent amendment to its legislation. The new law, signed on June 17, aims to rectify deficiencies that led to the country’s grey-listing by the Financial Action Task Force (FATF) in February 2024. Grey-listing subjects Kenya to increased monitoring and requires it to work with FATF to improve its ability to counter money laundering and terror financing.
The FATF had identified several weaknesses in Kenya’s anti-money laundering and combating of terrorism financing framework, including inadequate investigations and prosecutions, a lack of clear strategy, and unregulated non-profit organizations (NPOs). The country’s opaque handling of beneficial ownership disclosures and inadequate monitoring of certain entities, such as savings and cooperative organizations, law firms, and real estate agencies, were also noted.
In response, Kenya has made progress in addressing these concerns, with 29 of the 40 recommendations by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) considered adequately addressed by August 2024. The new Anti-Money Laundering and Combating of Terrorism Financing Act introduces significant changes, including enhanced oversight, stricter know-your-customer requirements, and increased penalties for non-compliance.
The act also strengthens cross-border information sharing and makes it harder for criminals to hide illicit funds in shell companies. However, key hurdles remain, particularly the government’s commitment to enforcing the provisions, especially against well-connected individuals who may use their positions to launder the proceeds of crime and corruption.
There are also concerns that the new laws may be used to target political opponents and constrict civic space. The government must ensure that regulatory agencies are empowered to work effectively and independently to curb money laundering, corruption, and associated organized crimes. Public awareness and outreach initiatives, such as the “Talk to Your Regulator” initiative, are necessary to explain the amendments to stakeholders and allay fears and misconceptions.
The effective implementation of the new law will be crucial in determining Kenya’s success in addressing its money laundering and terrorist financing concerns. If implemented with the right motives and resolve, the law will help to boost investor confidence, hasten Kenya’s removal from the FATF grey list, and make it harder for transnational criminal networks and terrorist organizations to operate in the country.
