Greylisting is when (FATF) puts a country under stricter economic monitoring and regulation.
It signifies the country does not completely meet the FATF's standards for fighting money laundering and terrorist financing, but is earnestly trying to.
The latest expert analysis by PricewaterhouseCoopers (PwC) indicates that the country has managed to act on several strategic deficiencies pointed out at the last review conducted in 2021.
'The review identified several strategic deficiencies in Kenya’s anti-money laundering framework, particularly in the financial services and non-profit sectors. As a result, it has been widely speculated that Kenya is a candidate for the grey list during the February 2024 plenary,'' PwC says in the review.
To forestall this outcome, the report says cross-industry regulators; lawmakers, enforcement authorities and individual institutions have gone to work, initiating a flurry of activities aimed at remediating the gaps noted.
These efforts have included the assenting of the AML/CFT (Amendment) Act, 2023, which made sweeping changes to key laws.
The Central Bank of Kenya, the Financial Reporting Centre and other regulators have also issued some new guidelines and stepped up their risk-based supervisory inspections.
In September, President William Ruto signed into law the Anti-Money Laundering and Combatting of Terrorism Financing Laws (Amendment) Bill, 2023.
The law sought to enhance at least 18 Acts of Parliament relating to anti-money laundering, countering the financing of terrorism and countering the financing of proliferation of weapons of mass destruction in addressing deficiencies identified during the Mutual Evaluation of Kenya.
Some of the amended Acts include the Extradition (Contiguous and Foreign Countries) Act (Cap 76) and Extradition (Commonwealth Countries) Act (Cap. 77).
Others are the State Corporations Act (Cap. 446), Capital Markets Act (Cap. 485A), Insurance Act (Cap. 487), Banking Act (Cap. 488) and the Central Bank of Kenya Act (Cap. 491).
In 2010, the body placed Kenya on a list of high-risk countries for delays in enacting laws to tackle criminal financial activity as well as a failure to track money laundering.
This was however reviewed in 2014 after FATF concluded that the country had established the legal and regulatory framework to address the strategic deficiencies identified.
In October, the global anti-money laundering watchdog retained four East African countries on the ‘grey’ list in its latest review of countries’ commitment to fighting money laundering, terrorist financing, and arms proliferation financing.
This, the report says may dampen hopes of promoting the region as an attractive investment destination.
Money laundering damages financial sector institutions critical for economic growth by promoting crime and corruption, thereby slowing growth and reducing efficiency in various sectors.
While foreign investors are crucial for the growth and expansion of companies, it is not easy to attract this group of financiers in money laundering countries leading to slowing foreign inflows.
The watchdog maintained Uganda, Tanzania, South Sudan, and the DR Congo on its list of jurisdictions under ‘increased monitoring’ noting glaring weaknesses in their measures to combat money laundering, terrorist financing, and proliferation financing.
While Uganda, Tanzania and DRC were noted as having made some steps to meet their political commitments to close these gaps, South Sudan has been noted as making little to no progress since June 2021 when these commitments were made, thereby posing the risk of slipping into the black list.
When a country is blacklisted, it is called upon to take countermeasures to protect the international financial system from continuing harm.
The FATF AML shortlist is another name for the blacklist, and countries on this list can be subject to economic sanctions by FATF member nations.
At present (October 2023), only the Democratic Republic of North Korea, Iran and Myanmar are mentioned in the FATF blacklist.
