Kenya’s Fight Against Financial Crime: A Pivotal Moment for Compliance, Reform, and Trust

Kenya stands at a critical juncture in its battle against financial crime, as international scrutiny intensifies around the effectiveness of its anti-money laundering (AML) and counter-terrorist financing (CFT) frameworks. The recent recommendations issued by the World Bank have sharpened focus on the urgent reforms needed to lift Kenya out of the Financial Action Task Force (FATF)’s “grey list,” where it landed in February 2024 due to identified “strategic deficiencies” in its AML/CFT regime. This designation, while not as severe as blacklisting, carries significant reputational and economic consequences. At stake is not only the resilience of the financial system but also investor confidence, public trust, and Kenya’s international standing.

Kenya’s journey in shaping a robust AML regime formally began in 2009 with the enactment of the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), which established key legal mechanisms for identifying, monitoring, and prosecuting financial crime. Among its core provisions are mandatory customer due diligence, the reporting of suspicious transactions, and the freezing of assets—requirements aligned with global norms set out by the FATF and the United Nations Convention against Transnational Organized Crime. However, implementation has lagged, and Kenya’s continued presence on the grey list signals persistent gaps. According to the World Bank’s 2025 fiscal policy report, reforms in compliance systems, governance structures, and enforcement practices are not just overdue—they are critical.

Central to these recommendations is the urgent passage and implementation of the Conflict of Interest Bill. This legislation mandates that public officials disclose private interests and recuse themselves where conflicts arise. In doing so, it would align Kenya’s public service ethics with Article 8 of the United Nations Convention against Corruption. Equally important is an overhaul of Kenya’s opaque and often discretionary business licensing systems, particularly at the county level. The World Bank advocates for a digitized, centralized licensing framework that reduces bureaucratic friction and closes corruption loopholes.

Accountability within law enforcement and the judiciary is another recurring concern. “Strengthening mechanisms for oversight of police and justice sector personnel” is critical, as these institutions are central to AML enforcement but are frequently viewed with skepticism by the public. The Central Bank of Kenya (CBK) and the Financial Reporting Centre (FRC) have taken steps in the right direction by tightening reporting standards and enforcing international AML norms across all financial entities, including fast-evolving digital platforms. Recent guidelines from both agencies now require enhanced due diligence for politically exposed persons (PEPs), tighter oversight of cross-border transfers, and the adoption of risk-based transaction monitoring.

The grey-listing by FATF is not merely symbolic. It means that Kenya has been categorized as a “Jurisdiction under Increased Monitoring,” a term which signifies serious yet addressable gaps in its AML/CFT regime. The causes of Kenya’s inclusion on the list are multifaceted. The country has struggled to enforce provisions in the amended Companies Act 2015 that mandate the disclosure of beneficial ownership. The registry, while established, remains marred by inaccuracies and a lack of inter-agency data sharing. Furthermore, despite an increase in suspicious transaction reports, prosecution rates remain stubbornly low, undermining the deterrent effect of existing laws. Corruption in public procurement and county finance also continues to erode the credibility of AML/CFT efforts.

Grey-listing carries measurable consequences. Financial institutions in Kenya now face more rigorous due diligence requirements from global partners. This can lead to disrupted correspondent banking relationships, delays in international transactions, and rising compliance costs. Investors may also view the designation as a red flag, dampening the country’s attractiveness as a destination for foreign direct investment. FATF’s Action Plan for Kenya, agreed upon in early 2024, lays out an ambitious reform roadmap that includes full operationalization of the beneficial ownership registry, improving conviction rates for money laundering, fostering stronger inter-agency collaboration, and boosting the supervisory powers of financial regulators. A follow-up assessment is slated for late 2025 to evaluate Kenya’s progress.

The World Bank’s recommendations go beyond narrow legal reforms to address systemic governance challenges. A key area of concern is public finance management. Despite the framework laid out by the Public Finance Management Act (2012), issues such as delayed budget appropriations and convoluted fund flows have created vulnerabilities. The World Bank recommends using digital dashboards to enable real-time monitoring of fund allocations and expenditures, thereby enhancing transparency and efficiency.

The digitization of business processes is another promising front. The expansion of Kenya’s eCitizen platform to function as a comprehensive “one-stop shop” for licenses, registrations, and permits can significantly reduce human intervention—a frequent source of rent-seeking behavior. Automating approval processes not only boosts transparency but also limits opportunities for manipulation.

Meanwhile, public trust in law enforcement and the judiciary remains low. To rebuild credibility, institutions like the Independent Policing Oversight Authority (IPOA) must be empowered with greater investigative capacity and legal authority. The World Bank further recommends stronger whistleblower protections to encourage internal reporting of corruption and abuse. On the international stage, Kenya’s membership in the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) and its collaboration with organizations like INTERPOL and the United Nations Office on Drugs and Crime (UNODC) provide a platform for intelligence sharing and joint enforcement efforts—a necessity given the cross-border nature of many financial crimes.

The stakes of AML reform extend far beyond the technicalities of financial regulation. According to the World Bank, curbing corruption in sectors like public procurement and traffic enforcement could yield up to 0.5% of GDP annually—funds that could be reinvested in social services, healthcare, and education. A streamlined, transparent licensing and regulatory system could also foster a more conducive environment for investment, entrepreneurship, and job creation.

“Kenya’s efforts to strengthen anti-money laundering laws and institutions are crucial for safeguarding the financial system, attracting investment, and delivering on the promise of inclusive growth,” said Kristina Svensson, World Bank Country Manager for Kenya, in a statement released with the 2025 report. The alignment of Kenya’s AML strategies with the Sustainable Development Goals (SDGs)—especially Goal 16 on peace, justice, and strong institutions—also reinforces its broader development agenda.

Looking ahead, Kenya’s reform priorities are clear. The beneficial ownership registry must be completed and operationalized. The Conflict of Interest Bill must be passed and enforced. Existing AML/CFT statutes should be brought into full compliance with international standards. Simultaneously, institutions like the FRC and CBK require significant investment in technology, human resources, and capacity building to effectively execute their mandates. The digitization of government services should be accelerated, oversight mechanisms bolstered, and high-profile financial crime cases prosecuted swiftly to restore faith in the justice system.

Beyond compliance, the goal is to instill a lasting culture of integrity and transparency across both public and private sectors. The active involvement of financial institutions, businesses, and civil society will be critical in shaping a compliance ecosystem that is not only legally sound but also socially responsive.

In the final analysis, Kenya’s push to reform its anti-money laundering laws and strengthen its institutional framework is more than a policy necessity—it is a national imperative. As the country navigates the path out of grey-listing and works to reclaim its reputation on the international stage, the coming year will be a defining chapter. Success will hinge on political will, cross-sector collaboration, and an unwavering commitment to the rule of law.

By fLEXI tEAM