For Kenya, a vibrant East African economic hub, recent news from the European Union has cast a long shadow: the country has been added to the EU's list of high-risk jurisdictions for money laundering and terrorism financing (AML/CFT) deficiencies. This designation, while part of a global effort to combat financial crime, carries significant implications for Kenya's international standing, its economy, and the everyday operations of its businesses and citizens. Understanding the nuances of this "blacklist" is crucial for navigating the path ahead.
On June 10, the European Commission officially listed Kenya alongside ten other nations – including Algeria, Angola, Côte d’Ivoire, Namibia, Laos, Lebanon, Monaco, Nepal, and Venezuela – as high-risk third countries. These jurisdictions, according to the EU, exhibit "strategic deficiencies" in their anti-money laundering and countering the financing of terrorism regimes, posing "significant threats to the EU’s financial system." This move comes after the Financial Action Task Force (FATF), the global money laundering and terrorist financing watchdog, had already placed Kenya and Namibia on its "grey list" in February 2024. The EU's action essentially mirrors and reinforces the FATF's assessment, indicating a unified international concern.
The EU's explanatory memorandum clarifies that its decision takes into account the FATF's identification of these countries in its "Jurisdictions under Increased Monitoring" list, which was updated multiple times in 2024 and early 2025. This continuous monitoring by the FATF, driven by the evolving nature of financial crime threats, necessitates a consistent adaptation of the legal framework on high-risk third countries to efficiently address existing and prevent new risks. While countries like Barbados, Gibraltar, Jamaica, Panama, the Philippines, Senegal, Uganda, and the United Arab Emirates have successfully been removed from the list, Kenya now faces the uphill battle of demonstrating robust reform.
Kenya's inclusion on such a list carries tangible economic and reputational consequences. Internationally, the designation can lead to increased scrutiny and due diligence requirements for financial transactions originating from or destined for Kenya. This means that Kenyan banks, businesses, and individuals engaging in cross-border trade, investments, or even remittances may face:
Heightened Transaction Scrutiny: Banks and financial institutions in EU member states, and potentially globally, will be required to apply enhanced due diligence measures to transactions involving Kenya. This can lead to delays, additional paperwork, and increased compliance costs.
Reduced Foreign Direct Investment (FDI): Investors from the EU and other cautious jurisdictions may become hesitant to commit capital to Kenya. The perceived risk associated with a high-risk listing can deter new investments and even prompt existing investors to reconsider their positions, impacting job creation and economic growth.
Increased Cost of Doing Business: Kenyan businesses, particularly those with international dealings, may find it more expensive to operate. Higher compliance costs, increased insurance premiums, and potential difficulties in accessing international financing can erode competitiveness.
Impact on Remittances: While not directly blocked, remittances from Kenyans living abroad, particularly those in EU countries, might experience delays or face additional verification steps, causing inconvenience for senders and recipients.
Reputational Damage: The "blacklist" status can tarnish Kenya's image as a reliable and transparent financial hub, affecting its standing in global financial markets and diplomatic relations.
Crucially, the EU Commission has acknowledged Kenya's proactive response to these concerns. Kenya, along with the other listed states, has made "written high-level political commitments" to address the identified deficiencies and has already developed clear action plans with the FATF for this purpose. This commitment was made in February 2024, signaling Kenya's recognition of the seriousness of the issue.
Since February 2024, Kenya has already taken tangible steps towards strengthening its AML/CFT regime. Notable actions include completing a Terrorism Financing risk assessment and bringing its Targeted Financial Sanctions framework, specifically related to proliferation financing, into compliance with international standards.
Looking ahead, Kenya is committed to implementing its FATF action plan to systematically address its strategic deficiencies. This comprehensive plan includes several key initiatives:
Risk Assessment Transparency: Presenting the results of its money laundering and terrorism financing national risk assessment and other relevant risk assessments in a consistent manner to competent authorities and the private sector, and subsequently updating national AML/CFT strategies.
Enhanced Supervision: Significantly improving risk-based Anti-Money Laundering/Countering the Financing of Terrorism supervision of both financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs). DNFBPs, which include entities and individuals engaged in non-financial activities potentially susceptible to money laundering and terrorist financing (e.g., real estate agents, lawyers, accountants), are critical targets for improved oversight.
Virtual Asset Regulation: Adopting a robust legal framework for the licensing and supervision of virtual asset service providers, acknowledging the growing risks associated with cryptocurrencies and other digital assets.
Preventive Measures: Enhancing the understanding and implementation of preventive measures by financial institutions and DNFBPs, with a particular focus on increasing the filing of suspicious transaction reports and ensuring the immediate implementation of targeted financial sanctions.
In a tangible legislative step, the Anti-Money Laundering and Countering Terrorism Financing Laws (Amendment) Bill, 2025, is already before the National Assembly for consideration. This legislative effort underscores the government's commitment to providing the necessary legal teeth to combat financial crimes effectively. The EU Commission has welcomed these commitments, urging the listed jurisdictions to "swiftly complete the implementation of their respective action plans within the proposed time frames."
Kenya's inclusion on the EU's high-risk list for AML/CFT deficiencies is a serious matter with far-reaching implications for its economy and international standing. It signals the imperative for immediate and decisive action. However, the government's demonstrated political commitment and the concrete steps already underway, including the legislative reforms and collaboration with FATF and ESAAMLG, offer a clear pathway to rectification.
