The European Commission has classified Kenya as a high-risk country for money laundering and terrorism financing, a move that could impact the country’s access to global financial systems. The announcement was made on Tuesday, with the Commission advising EU member states such as Germany, France, Spain, and the Netherlands to exercise enhanced due diligence in transactions involving Kenya.
This decision aligns with the recommendations of the Financial Action Task Force (FATF), the global standard-setter in combating money laundering and terrorism financing. FATF placed Kenya on its grey list in 2023, citing deficiencies in the country’s anti-money laundering and counter-terrorist financing frameworks. Among the key concerns were Kenya’s lack of a clear prosecution strategy for money laundering offences and inadequate supervision of financial institutions.
In addition to Kenya, the European Commission added several other jurisdictions to its list, including Algeria, Angola, Côte d’Ivoire, Laos, Lebanon, Monaco, Namibia, Nepal, and Venezuela. Meanwhile, countries like Uganda, the Philippines, Panama, Barbados, and the United Arab Emirates were removed from the list, having made significant progress in strengthening their regulatory frameworks.
According to Maria Luís Albuquerque, the EU Commissioner for Financial Services, the updated list reflects the EU’s commitment to international standards and its efforts to protect the integrity of its financial system. “Identifying and listing high-risk jurisdictions remains a crucial tool,” she said.
Being on the EU’s high-risk list can lead to increased scrutiny from global banks, higher transaction costs, and diminished investor confidence. This adds urgency to Kenya’s need to implement reforms.
FATF has recommended that Kenya adopt a legal framework for supervising virtual asset service providers, such as cryptocurrency exchanges. It also urged the government to enhance regulation of trusts and improve the collection of beneficial ownership information.
Additionally, Kenya is expected to strengthen its financial intelligence, increase investigations into money laundering and terrorism financing, and revise the regulatory framework for non-profit organisations.
To avoid long-term economic repercussions, Kenya must now move swiftly to implement these reforms and restore global confidence in its financial system.
