The KDF is involved in a $400 million (Sh41 billion) sugar and charcoal smuggling business that funds al Shabaab militants in Somalia, a report has found.
Referring to loaders, traders and intelligence, the report released on Thursday stated about 150,000 tonnes of illicit sugar are ferried into Kenya through Kismayo every year.
"Workers at the Port in Kismayo said around 230 trucks of 14 tonnes each leave Kismayo for Kenya, around 3,000 tonnes a week," the report read.
Key military officials involved earn Sh5 billion annually from the trade, said the report that further implicated unnamed key figures in the Defense ministry, the Immigration department and State House.
"The network enjoys the protection and tacit cooperation of leaders at the highest echelons of the Executive and the National Assembly," it stated.
"Parliament and foreign embassies all described a situation in which a high ranking military official is at the head of a smuggling network which includes commanders of KDF forces within Amisom."
The report dubbed 'Black and white: Kenya's criminal racket in Somalia' also revealed the charcoal is exported in a business that though "somewhat disrupted and diminished, is still a mainstay of revenue for al Shabaab, Jubaland and KDF."
It noted that the port tax for exported charcoal, split among the Jubaland administration of Ahmed Madobe, KDF and al Shabaab is about $3 (Sh306) a bag.
The report by the Journalists for Justice rights group in Nairobi further accused Kenyan troops of "widespread human rights abuses", including wrongly targeted air strikes, torture, abduction and rape.
"The consistent pattern that emerged was of airstrikes targeting crowds of people and animals. The majority of victims seem to be herders and their livestock. Many complained of water points being destroyed," it read.
"Contrary to government claims of al Shabaab targets destroyed, dozens of victims recounted the targeting of civilian villages, water-points and livestock."
On Thursday, Kenyan security forces reported they had destroyed five camps used by suspected al Shabaab militants in a sweep at Boni Forest.
The army and police launched the operation two months ago in the forest close to the Somali border, to flush out militants it believed were using the area to launch strikes.
Head of the operation, James Serian, told Reuters the hideouts were destroyed and weapons handed to the government, adding suspects were due to appear in court.
The report further stated that there has been no accountability for the civilian casualties in Kenya's shelling of Kismayo before the KDF took over.
"Apart from fighting the militants the KDF are in garrison mode, sitting in bases while senior commanders are engaged in corrupt business," it stated.
The report followed interviews "with more than 50 people with "intimate knowledge" of KDF activities, the group said.
Participants were drawn from Kenya and Somalia and included officers, United Nations officials, Western intelligence sources, sugar traders, porters and drivers.
A government spokesman called the report "absolute garbage" and said it undermined Kenya's effort to stabilise Somalia, a nation ravaged by more than two decades of war and chaos.
"What we are seeing is intellectual dishonesty masquerading as research," the spokesman told Reuters of the report.
KDF Spokesman David Obonyo also dismissed the report, saying: "It is not correct and it is not factual."
On October 26, the United Nations once again accused Kenya of aiding a flourishing illicit sugar trade at the port of Kismayu in Somalia.
A report by the UN Monitoring Group for Somalia and Eritrea said the trade is worth more than $800,000 (Sh81.8 million) annually.
The report says this provides a financial lifeline and source of revenue for al Shabaab terror group and Somalia-based warlords.
Cord leader Raila Odinga had claimed KDF soldiers smuggle most of the sugar in shops into Kenya through the Port of Kismayo, following reports of a purported sugar deal between Kenya and Uganda.