On 17 June 2025, Kenya’s President William Ruto signed the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2025 into law. The act is intended to address deficiencies in Kenya’s money laundering and terrorism financing framework as identified by the Financial Action Task Force (FATF), the global watchdog for these crimes.
The FATF grey-listed Kenya in February 2024, after a 10-year hiatus. Grey-listing means the country is under increased monitoring and is working with the FATF to address its inability to counter money laundering and terror financing using existing laws, policies and strategies. It adversely impacts Kenya’s investment attractiveness and undermines its credibility as a reliable regional partner.
The FATF’s assessment found that Kenya could not demonstrate any successful investigations into or prosecutions of money laundering offences despite its high-risk profile, and lacked a clear strategy to do so. There were also no adequate investigations or prosecutions of legal or natural persons for terrorist financing offences despite the country conducting several terrorism-related investigations.
The assessment also noted that although Kenya had numerous non-profit organisations (NPOs), the sector was largely unregulated – highlighting an area of risk for terrorism financing. The FATF recommended that Kenya revise ‘the framework for NPO regulation and oversight to ensure that mitigating measures are risk-based and do not disrupt or discourage legitimate NPO activity.’
The body considered the country’s handling of beneficial ownership disclosures opaque, which could allow politically exposed persons to own and launder corruption proceeds through phony entities. Kenya was cited as lacking the enhanced due diligence procedures required for such persons conducting transactions in the country.
Other deficiencies included the lack of a risk-based approach to supervising and monitoring other financial institutions and Designated Non-Financial Businesses and Professions (DNFBPs) aside from banks and microfinance institutions. These include savings and cooperative organisations, law firms, real estate agencies, casinos and gambling companies, among others.
Kenya also lacks regulatory frameworks to monitor and regulate virtual assets and virtual asset service providers, risking the use of such assets, including digital assets such as cryptocurrencies, in money laundering and terrorist financing.
The country has implemented measures to address these concerns. An April 2024 report by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG), which provides mutual evaluation reviews for member states, indicated that Kenya had made progress in resolving some of the technical compliance shortcomings identified in its 2022 Mutual Evaluation Report. Of the 40 recommendations made by ESAAMLG, 15 were considered adequately addressed and re-rated, meaning the cited deficiencies have been resolved. By August 2024, 14 more recommendations were re-rated.
Perhaps the most significant progress made by Kenya has been passing the Anti-Money Laundering and Combating of Terrorism Financing Act – which itself amended several other relevant laws.
High Court Advocate Wendy Muganda said the act introduces significant changes to address deficiencies cited by the FATF. It enhances the Financial Reporting Centre’s (FRC) oversight over banks, financial institutions and DNFBPs. Financial institutions and DNFBPs are now required to implement enhanced due diligence on high-risk customers, politically exposed persons and large cash transactions.
It also introduces stricter know-your-customer requirements and mandates more frequent reporting of suspicious transactions to the FRC. It emphasises a risk-based approach, meaning institutions must assess and mitigate risks based on the nature of their business and clientele.
The act proposes stricter penalties and increased criminal liability for individuals and companies that do not adhere to anti-money laundering/counter-terror financing (AML/CTF) obligations. It also enhances beneficial ownership transparency, making it hard for criminals to hide illicit funds in shell companies.
Lastly, it strengthens cross-border information sharing between Kenyan authorities and international AML/CTF agencies like ESAAMLG.
Key hurdles remain, however – particularly government’s will to enforce the amendments’ provisions, especially against well-connected individuals who may use their positions to launder the proceeds of crime and corruption. The country has historically struggled with implementing similar laws and policies.
Key organisations such as the FRC, Ethics and Anti-Corruption Commission and other specialised agencies require additional resources and independence to effectively carry out their core AML/CTF mandates.
Bernadette Nzomo, Kenya’s Public Benefit Organisations Regulatory Authority’s (PBORA) research and policy head, said that the government had formulated a risk-based assessment of the inherent vulnerabilities of the NPO sector. Speaking during deliberations on the strategy for Kenya’s NPO Working Group on FATF, she said government had identified eight potential features of NPOs that may be ‘at risk’ of terrorist financing.
PBORA is tasked with overseeing and monitoring the NPO sector. As part of its mandate, it can initiate investigations in coordination with other state agencies and act against those who engage in terror financing and money laundering. Nzomo said that should an NPO be investigated for terror financing or money laundering, it would be done with minimal disruptions to their service delivery.
However, these institutions should not be used to target political opponents as a means to settle scores and undermine justice and fairness.
‘There are fears that the government’s regulatory agencies may use the new laws and recommendations from the FATF to constrict civic space and clamp down on vocal civil society organisations that call for accountability, good governance, and adherence to human rights,’ observed a civil society activist who requested anonymity. ‘A prominent human rights organisation was once blacklisted for terror financing for being vocal against enforced disappearance and extra-judicial killings. We must ensure that it does not happen.’
The recent charging of youth protesters under terrorism laws demonstrates how weaponising laws in Kenya can constrict civic space, as evidenced by a Centre for Human Rights and Policy Studies study. In 2021, the FATF even launched a review of the unintended consequences of its measures, investigating whether AML/CFT measures are responsible for derisking, financial exclusion and the suppression of NPOs and human rights.
Political will remains the biggest factor determining whether the amendments are effectively implemented, and the FATF-cited deficiencies are remedied and their recommendations complied with. The government must also empower state regulatory and compliance agencies to curb money laundering, corruption and associated organised crimes.
State institutions and their partners must carry out adequate public awareness sessions to explain the amendments to stakeholders and allay any fears and misconceptions. A tangible example of such outreach is the Talk to Your Regulator initiative organised by the Kenya NPO Working Group on FATF in partnership with PBORA on 19 May 2025. The event brought together NPOs, state oversight and regulatory agencies, financial institution representatives and policy experts to foster stakeholder collaboration and dialogue to develop actionable strategies to ensure risk-based approaches are taken in terror financing oversight and regulation of the NPO sector.
By strengthening the legal framework, introducing practical measures and closing loopholes in the financial and NPO sectors to effectively curb money laundering and terror financing, the act is a step in the right direction for Kenya. In the short term, this will hasten the removal of the country from the FATF’s grey list, boosting investor confidence. Long term, it will make it harder for transnational criminal networks and regional terrorist organisations to invest the proceeds of their crimes and move their funds through Kenya’s formal and informal financial institutions and NPO sectors.
Halkano Wario, ROCO East Africa
Image: William Samoei Ruto, PhD/X
