- In February this year, Kenya and Namibia became the latest additions to the greylist. For Kenya, this is not our first rodeo, so to speak.
- We were first added to this insalubrious club back in 2010 when we were guilty of failing to enact anti-money laundering laws.
What do Kenya, Burkina Faso, Cameroon, the Democratic Republic of Congo, Mali, Mozambique, Namibia, Nigeria, Senegal, South Africa, South Sudan and Tanzania have in common?
Apart from membership of the African Union, they are also members of a sort of club. No, not the Commonwealth, but the Paris-based Financial Action Task Force’s (FATF) greylist. The greylist club is a club no country wants to be in.
The FATF describes itself as a global money laundering and terrorist financing watchdog. According to the FATF website, “It sets international standards that aim to prevent these illegal activities and the harm they cause to society.”
Countries on the greylist are those that have chosen to cooperate with the FATF to address strategic inadequacies in their efforts to counter money laundering, terrorist financing and proliferation financing.
Proliferation financing relates to providing funds or financial services for the manufacture, acquisition, development, trans-shipment, brokering, transport, etc, of nuclear, chemical or biological weapons and their means of delivery.
In February this year, Kenya and Namibia became the latest additions to the greylist. For Kenya, this is not our first rodeo, so to speak.
We were first added to this insalubrious club back in 2010 when we were guilty of failing to enact anti-money laundering laws.
It took the operationalising of the Financial Reporting Centre in 2012 and the enacting of several laws to tackle illicit cash flows, before Kenya dropped from the list in 2014.
A decade later we are back on this list and according to the Global Financial Integrity website, the main reason for this is: “Kenya lacks a clear strategy on the prosecution of money laundering offences.”
The FATF assessment found that Kenya could not demonstrate any successful investigation and prosecution of any money laundering offences.
Another problem was that “Kenya has a large sector of Non-Profit Organisations, but the sector is largely unregulated and unsupervised hence the risk of terrorism financing abuse remains unidentified.”
One of the actions Kenya has taken is to announce plans to introduce new laws for cryptocurrency trading, such as bitcoin.
Kenya is reportedly one of Africa’s leaders in the field of cryptocurrency adoption and usage but the absence of a regulatory framework for overseeing the crypto industry poses risks.
As such there has been a failure to regulate flows of money through such alternative financial forms.
Because of their flexibility and convenience, cryptocurrencies are reportedly popular in countries struggling with economic instability and soaring inflation rates.
While the less regulated world of cryptocurrencies presents a series of opportunities and advantages to the financial sector, criminals are attracted to cryptocurrencies by the potential for anonymity, which creates opportunities for activities such as money laundering and terrorist financing.
South Africa, where I live, was added to the greylist in February 2023 despite having been warned as far back as 2021. In that year SA was given a year to show progress in adhering to 67 recommendations by the FATF or face the risk of being greylisted.
The greylisting came into effect despite the government taking steps to ensure it approved important amendment bills aimed at plugging gaps in the country’s anti-money laundering and anti-terrorism funding laws.
According to the SA National Treasury: “A jointly agreed Action Plan was adopted listing 22 action items linked to the strategic deficiencies identified. South Africa is required to address all 22 items, to exit the FATF grey list.”
In February this year it emerged that SA had “addressed or largely addressed” five of the 22 Action Items
In a statement, the Treasury said: “While South Africa is on track to address all the outstanding action items, it remains a tough challenge to address all 17 of the remaining action items by February 2025.”
In its efforts to get off the list, the SA government has improved the capacity of agencies such as the South African Revenue Service and the National Prosecuting Authority to combat issues such as money laundering.
They have also passed at least two new laws aimed at addressing money laundering and terror financing.