A Diverging Path for African Economies

NAIROBI – Kenya’s position as East Africa’s premier financial hub is under renewed scrutiny after the Financial Action Task Force (FATF), the global anti-money laundering watchdog, retained the country on its list of jurisdictions under increased monitoring, commonly known as the ‘grey list’. The decision, announced at the conclusion of the FATF plenary in Paris on Friday, 24 October 2025, creates a stark contrast with the progress of other major African economies.

In a significant development for the continent, four African nations—Nigeria, South Africa, Mozambique, and Burkina Faso—were removed from the grey list. The delisting signals that these countries have made substantial reforms to their anti-money laundering and counter-terrorist financing (AML/CFT) frameworks. FATF President Elisa de Anda Madrazo lauded the progress as a "positive story for the continent of Africa," highlighting improved coordination between government agencies in Nigeria and enhanced tools to detect illicit transactions in South Africa.

Kenya, which was re-listed in February 2024 after a ten-year hiatus, was represented at the plenary by a delegation including Financial Reporting Centre (FRC) Director General Saitoti ole Maika. However, despite legislative efforts, the country has yet to convince the global body that it is effectively tackling illicit financial flows.

The Economic Cost of Remaining Grey

Remaining on the grey list carries significant economic and reputational costs for Kenya. The designation can lead to reduced foreign direct investment, increased compliance costs for banks and businesses, and potential difficulties in securing international financing. Compounding the pressure, the European Union added Kenya to its own list of high-risk third countries in June 2025, forcing European financial institutions to apply enhanced due diligence to transactions involving Kenyan entities. This move increases the complexity and cost of doing business, threatening to undermine the Nairobi International Financial Centre's ambition to become a gateway for global investment into Africa.

According to a July 2025 report from Kenya's Financial Reporting Centre, the scale of the challenge is immense. The FRC received filings flagging Sh6.976 trillion in suspicious transactions between 2021 and 2023, with banks handling over 91% of this amount. The report highlighted tactics such as the use of shell companies and splitting large transactions to avoid detection, pointing to systemic vulnerabilities that criminals exploit.

Why Kenya Lags: The Gap Between Law and Action

The core of Kenya's challenge lies in demonstrating effective implementation of its laws. When placing Kenya on the grey list, the FATF cited several critical deficiencies. These included a failure to demonstrate successful investigations and prosecutions of money laundering, particularly in line with the country's high-risk profile. Other key concerns were the inadequate regulation of non-profit organisations (NPOs) against potential terrorist financing abuse and weaknesses in the transparency of beneficial ownership—the real individuals who own and control companies.

In response, President William Ruto on Tuesday, 17 June 2025, signed into law the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2025. The presidency stated the law aims to seal gaps that facilitate illicit flows via property transactions and shell companies by strengthening regulatory oversight. The amendments expand the FRC's powers and bring more sectors, including real estate agents, SACCOs, and dealers in precious metals, under tighter AML/CFT regulation.

However, the key to exiting the grey list is not just legislation but enforcement. South Africa's successful exit was partly attributed to its ability to demonstrate a "sustained increase in investigations and prosecutions of serious and complex money laundering." Similarly, Nigeria's delisting followed the enactment of new laws in 2022, the operationalisation of a beneficial ownership register, and enhanced inter-agency coordination.

The Path Forward for Kenya and East Africa

For Kenya to follow its peers, the focus must now shift decisively from legislative reform to tangible results. This includes a significant increase in the number and complexity of money laundering and terrorist financing prosecutions, effective implementation of the beneficial ownership registry to ensure corporate transparency, and a risk-based approach to supervising NPOs and other high-risk sectors.

The regional context is also critical. With Uganda's successful removal from the grey list in February 2024 and Tanzania having been delisted in June 2025, Kenya is now an outlier among its East African Community partners. This situation could impact regional trade and finance, as increased scrutiny on Kenya may create transactional friction with its neighbours. Speaking on 16 October 2025, Kenya Revenue Authority (KRA) Board Chairman Ndiritu Muriithi called for stronger regional cooperation to track illicit flows, while also arguing that FATF's assessment was based on a "very Eurocentric view" that didn't fully appreciate innovations like mobile money.

While Kenyan authorities have not issued a formal statement following the October plenary, the government's commitment to implementing its FATF action plan remains under the international spotlight. The success of Nigeria and South Africa provides a clear, albeit challenging, roadmap. The coming months will be crucial in determining whether Kenya can translate its legislative reforms into the concrete enforcement actions required to restore international confidence in its financial system.