Kenya and UK Treasury Join Forces to Combat Financial Crimes
Kenya has made a significant move to strengthen its financial system by partnering with the United Kingdom’s His Majesty’s Treasury. This collaboration aims to improve the Central Bank of Kenya’s (CBK) supervision of non-bank financial institutions such as microfinance firms, foreign exchange bureaus, and money remittance providers. These institutions, once seen as weak links in Kenya’s financial oversight, were noted as factors in the country’s placement on the Financial Action Task Force (FATF) grey list in February 2024.
The Background: Kenya on FATF Grey List
The FATF grey list includes countries that have strategic weaknesses in fighting money laundering, terrorist financing, and proliferation financing. Kenya’s addition to this list raised concerns about its ability to follow global financial standards. Being on the grey list makes international transactions more expensive, slows down cross-border banking relationships, and may discourage foreign direct investment.
According to official CBK and FATF documents, Kenya was flagged for not sufficiently monitoring certain financial service providers and for inadequate enforcement of anti-money laundering (AML) measures. This gap created weaknesses that criminal networks could exploit.
The UK-Kenya Partnership
CBK Governor Kamau Thugge confirmed that the partnership with the UK Treasury includes both virtual and in-person technical assistance. This support has already helped develop and implement a risk-based supervisory framework. This framework focuses on detecting, preventing, and tackling money laundering, terrorism financing, and proliferation financing within non-bank financial institutions.
The UK’s involvement brings global expertise in regulating financial crime. It also shows confidence in Kenya’s efforts to improve compliance and reduce systemic risks. This partnership also aligns with recommendations in the FATF’s February 2024 report.
1. Grey List Exit Strategy: Strengthening AML systems directly addresses FATF’s concerns and is a vital step toward Kenya's removal from the grey list.
2. Boosting Investor Confidence: Restoring Kenya’s international credibility can enhance investor trust, lower transaction risks, and improve banking relations with foreign institutions.
3. Safeguarding Kenya’s Economy: Money laundering and terrorism financing hurt legitimate growth. Stronger supervision helps protect Kenya’s economy from criminal activity.
4. Building Internal Capacity: By adopting international best practices, CBK equips itself with sustainable tools to regulate and monitor financial institutions more effectively.
Kenya still needs to ensure that its framework is operational and effectively enforced. FATF usually requires proof of consistent implementation before a country can exit the grey list. CBK must show ongoing supervision, reporting, and enforcement against violators.
Additionally, non-bank financial institutions must now follow stricter regulations, including enhanced reporting, customer due diligence, and real-time monitoring. Non-compliance could lead to penalties, licence revocations, or stricter enforcement.
The partnership between CBK and the UK Treasury marks a significant step to restore Kenya’s financial credibility. While challenges remain, Kenya’s proactive approach sends a clear message: the country is committed to fighting financial crime and following international standards. If implemented successfully, this collaboration could lead to Kenya’s exit from the FATF grey list, restoring trust among investors, international banks, and global markets.
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