- The grey list refers to countries that have deficiencies in dealing with money laundering and terrorist financing.
- Almost 10% of all AMLs that have occurred across the globe are AML compliance failures.
The inclusion of Kenya in the global money laundering watch list could discourage foreign investment and deter businesses from setting up in the country.
The grey list refers to countries that have deficiencies in dealing with money laundering and terrorist financing.
This means Kenya will be under increased scrutiny by the Financial Action Task Force, with the country expected to make critical changes to its financial infrastructure to reduce the risk of being a haven for dirty money.
Money laundering refers to the process criminals use to disguise illegally obtained funds as legitimate income.
Anti- Illicit Financial Flows (IFF) organisations in Kenya led by Global Financial Integrity (GFI), Oxfam, Transparency International Kenya (TI-Kenya) and Civil Forum for Asset Recovery (CiFAR) now want stringent measures taken to avert a crisis.
The sentiment comes at the time the latest global report on Anti-Money Laundering (AML) shows countries are investing in sophisticated tools to deter the vice.
Data shows that between August 2013 and August 2023, there were 16,150 AML events recorded on AML Penalties across the globe.
According to the report, across the world, drug trafficking is the most prevalent AML event at 29.3%, closely followed by financial fraud (22.2%) and money laundering (17.6%).
Almost 10 per cent of all AMLs that have occurred across the globe are AML compliance failures.
"The true nature of the drug trafficking problem across the globe is hard to understand because much of its activity is hidden. It’s influenced by geography, socio-economic factors, and law enforcement efforts - and often involves large criminal networks,'' the report reads.
The Finance Action Task Force (FATF) put Kenya on the condemned list late last month after failing to put in place adequate anti-money laundering safeguards.
The country has been flagged as a regional hub for illicit gold as well as a transit for drug and wildlife traffickers, with law firms, casinos, and real estate agents being highlighted as some of the enablers of money laundering.
It has joined 23 other countries in a list of shame known as the ‘grey list'.
In a statement, the local non-governmental organisations said Kenya's reputation, as a stable and transparent financial environment will be compromised, potentially discouraging foreign investment and deterring businesses from operating in the country.
Research shows that reduction in foreign direct investment (FDI) to GDP ratio by up to two per cent for countries with low FATF scores.
The same research shows that FDI inflows can decline by three per cent, portfolio inflows by 2.9 percent, and other investment inflows by 3.6 per cent of GDP.
"For a country seeking to balance its trade deficit and reduce its debt burden, the reduction of FDIs and investment inflows would be catastrophic to the economy,'' the local NGOs said in a joint statement.
Kenya has joined Tanzania and South Sudan in the grey list. Other African countries on the list include Nigeria, South Africa, Mali, Mozambique, Burkina Faso, Senegal and Cameroon.
Uganda was removed from the list following recommendations of FATF's fifth plenary.
Last year, the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which monitors how the region is implementing global measures against dirty cash, noted that Kenya received a suspect Sh72.2 billion in cash in the four years to 2021 that was not sufficiently explained.
According to ESAAMLG, between 2017 and 2021, a total of $1.85 billion (Sh262 billion), €6.97 million (Sh1 billion), £7.80 million (Sh1.4 billion) and Sh482.84 million had left Kenya in cash.
In the same period, Kenya received $455.35 million (Sh62.4 billion), €34.34 million (Sh5.2 billion), £11.69 million (Sh2.1 billion) and Sh482.8 million. This adds up to about Sh70.2 billion.