Kenya is likely to remain under enhanced scrutiny for weaknesses in combating money laundering and terrorist financing when the Financial Action Task Force (FATF) updates its list later this week.
The country was placed on the FATF grey list in February 2024 after the global watchdog found strategic deficiencies in Kenya's anti-money laundering and counter-terrorism financing regime.
Since then, President William Ruto’s regime has been rolling out sweeping legal, regulatory and institutional reforms in an effort to satisfy the watchdog's action plan.
Even so, analysts argue that while policy reforms have gathered pace, enforcement, particularly the successful prosecution of complex financial crimes and preservation of criminal assets, remains Kenya's weakest link.
Anti-corruption agencies, prosecutors and financial crime experts are pointing fingers at the Judiciary over court decisions, they say, are undermining the war against illicit financial flows.
“In some instances, courts have lifted freezing orders on suspicious assets, granted favourable bail terms or delayed the conclusion of high-profile money laundering cases,’’ Cyprian Kago, a financial crimes expert, told the Star.
“One recurring concern has been the fate of proceeds of crime once cases reach court,’’ a senior cabinet secretary who is playing a vital role in ensuring Kenya exits the grey list said.
In recent years, Kenyan courts have lifted preservation orders in several high-profile cases after finding insufficient evidence linking assets to criminal conduct.
Similarly, courts have dismissed or delayed several money laundering prosecutions linked to major corruption investigations due to procedural objections, constitutional petitions, or prolonged litigation.
Such decisions have been welcomed by defense lawyers as victories for due process but criticised by investigators as setbacks to the country's anti-money laundering campaign.
At some point, the former Assets Recovery Agency (ARA) director, John Kagucha, lamented that lengthy court processes significantly undermine asset recovery efforts, allowing suspects time to dissipate wealth suspected of having been acquired illegally.
The Ethics and Anti-Corruption Commission (EACC) has also repeatedly cited prolonged litigation and appeals as major obstacles to recovering stolen public assets.
According to the FATF, countries seeking removal from the grey list must demonstrate not only strong laws but also effective implementation through investigations, prosecutions, confiscation of criminal proceeds, and proportionate sanctions.
The Judiciary has, however, defended itself, calling upon anti-corruption agencies to collaborate more closely within the criminal justice system, especially those with overlapping mandates.
Speaking during a capacity-building workshop organised by the National Integrity Academy (NIAca), Justice Benjamin Musyoki, Judge, Anti-Corruption and Economic Crimes Court, defended the judiciary.
“The courts come in at the tail end from the time a crime is being conceived and initiated. Cases are won at the early stages of investigations or drawing of charges,” he said.
Kenya has made notable progress, with FATF itself acknowledging in February 2025 that the country had made several technical compliance deficiencies identified during its mutual evaluation.
Among the reforms undertaken are amendments to the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), enhanced supervision of banks, casinos, real estate dealers and virtual asset service providers.
It has also improved beneficial ownership registers, stronger coordination among the Financial Reporting Centre (FRC), Directorate of Criminal Investigations (DCI), Office of the Director of Public Prosecutions (ODPP) and other agencies, as well as increased cross-border intelligence sharing.
The economic implications of remaining on the FATF grey list are significant.
Although grey listing does not attract sanctions, it subjects financial transactions originating from Kenya to enhanced due diligence by international banks and investors.
According to the FATF, countries on the grey list experience higher compliance costs, slower cross-border transactions and increased scrutiny from correspondent banks.
Studies by the International Monetary Fund indicate that grey-listed countries often experience reduced foreign direct investment, declining capital inflows and higher borrowing costs as investors factor in elevated financial crime risks.
For instance, those studies show a reduction in the foreign direct investment (FDI) to GDP ratio by up to two per cent for countries with low FATF scores.
Furthermore, FDI inflows can decline by three per cent, portfolio inflows by 2.9 per cent, and other investment inflows by 3.6 per cent of GDP.
For Kenya, whose economy relies heavily on foreign investment, diaspora remittances, international trade and global banking relationships, prolonged grey-listing could raise transaction costs for businesses while making the country less attractive to international investors.
Banks have already invested billions of shillings in stronger customer due diligence systems, transaction monitoring technology and compliance personnel to align with international standards.
As the FATF prepares to release its latest assessment, experts say Kenya's progress will be judged not merely on laws passed or policies announced, but on whether those reforms have translated into tangible results.
“The watchdog will evaluate successful investigations, prosecutions, convictions and confiscation of illicit wealth,’’ Kago said.
