FATF Status

Kenya is on the FATF List of Countries that have been identified as having strategic AML deficiencies.

Latest FATF Statement  -  23 February 2024

In February 2024, Kenya made a high-level political commitment to work with the FATF and ESAAMLG to strengthen the effectiveness of its AML/CFT regime. Since the adoption of its MER in September 2022, Kenya has made progress on some of the MER’s recommended actions including by making amendments to its AML/CFT legislation to bring its framework in closer compliance with the FATF recommendations and establishing a case management system to better manage its international cooperation requests. Kenya will work to implement its FATF action plan by: (1) completing a TF risk assessment and presenting the results of the NRA and other risk assessments in a consistent manner to competent authorities and the private sector and updating the national AML/CFT strategies; (2) improving risk-based AML/CFT supervision of FIs and DNFBPs and adopting a legal framework for the licensing and supervision of VASPs; (3) enhancing the understanding of preventive measures by FIs and DNFBPs, including to increase STR filing and implement TFS without delay; (4) designating an authority for the regulation of trusts and collection of accurate and up-to-date beneficial ownership information and implementing remedial actions for breaches of compliance with transparency requirements for legal persons and arrangements; (5) improving the use and quality of financial intelligence products; (6) increasing ML and TF investigations and prosecutions in line with risks; (7) bringing the TFS framework in compliance with R.6 and R.7 and ensure its effective implementation; and (8) revising the framework for NPO regulation and oversight to ensure that mitigating measures are risk-based and do not disrupt or discourage legitimate NPO activity.

Compliance with FATF Recommendations 

The latest follow-up Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Kenya was undertaken by the Financial Action Task Force (FATF) in 2017. According to that Evaluation, Kenya was deemed Compliant for 1 and Largely Compliant for 24 of the FATF 40 + 9 Recommendations.

US Department of State Money Laundering assessment (INCSR) 

Kenya is categorised by the US State Department as a Country/Jurisdiction of Primary Concern in respect of Money Laundering and Financial Crimes.

Overview

Kenya is vulnerable to money laundering, financial fraud, and terrorism financing, and it appeared to take a step backward in the past year.  Kenya is the financial hub of East Africa, and mobile banking far surpasses cash transactions in the formal economy.  Money laundering occurs in the formal and informal sectors, deriving from both domestic and foreign criminal operations, including transnational organized crime; cybercrime; corruption; trafficking of drugs, illegal timber, charcoal, and wildlife; smuggling and trade-based money laundering (TBML); and counterfeit goods.  Kenya’s enforcement regimes are legally sound, but authorities lack the resources, and perhaps the will, to enforce them with vigor.  In October 2021, President Kenyatta ordered the lifting of the large cash transaction reporting requirement.

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           31

World Governance Indicator – Control of Corruption             24

Kenya's competitiveness is held back by high corruption levels that penetrate every sector of the economy. A weak judicial system and frequent demands for bribes by public officials lead to increased business costs for foreign investors. Widespread tax evasion hinders Kenya's long-term economic growth, and fraud in public procurement is rampant. Corruption, active and passive bribery, abuse of office and bribing a foreign public official are criminalized under the Anti-Corruption and Economic Crimes Act 2003, in addition to the Bribery Act of 2016 which strengthens the fight against the supply-side of corruption. Facilitation payments are criminalized and there are rules for what types of gifts public officials are allowed to accept. Adequate enforcement of Kenya's anti-corruption framework is an issue as a result of weak and corrupt public institutions. For further information - GAN Integrity Business Anti-Corruption Portal

Kenya has a positive investment climate that has made it attractive to international firms seeking a location for regional or pan-African operations. Kenya’s August 2022 general elections ushered in a new government that is focused on attracting more foreign direct investment (FDI) and enacting policies that are conducive to U.S. investment. The new administration’s five-year economic development plan, dubbed the Bottom-Up Economic Transformation Agenda, identifies agriculture; micro, small and medium enterprises (MSMEs); affordable housing and settlement; universal healthcare coverage; digital superhighway; and the creative economy as core pillars towards achieving transformational inclusive growth. In July 2022, the United States and Kenya launched the Strategic Trade and Investment Partnership negotiations, a first-of-its-kind bilateral U.S. trade agreement in sub-Saharan Africa.

In April 2023, the President of Kenya announced a series of tax and regulatory reforms aimed at improving Kenya’s investment climate, including completing Kenya’s National Tax Policy by June 2023, and keeping it in place for a minimum of three years. The President also committed to, by June 2023, removing the VAT on exported services, paying all verified tax refund claims within six months or if not repaid allowing the taxpayer to offset the claims against future tax liabilities, and removing the tax on unrealized gains on employee-allocated shares for startup companies. All these reforms and others were incorporated into the 2023 Finance Act signed by President Ruto in June 2023; implementation of these reforms remained pending as of July 2023 due to legal challenges to other components of the Finance Act.  Despite this progress, U.S. businesses operating in Kenya still face burdensome bureaucratic processes and delays in receiving necessary business licenses. Corruption remains pervasive and Transparency International ranked Kenya 123 out of 180 countries in its 2022 Global Corruption Perception Index – reflecting modest progress over the last decade but still below the global average.

Kenya’s Mombasa Port is the gateway to the East African market with almost 500 million consumers. Kenya’s membership in the East African Community (EAC), the Africa Continental Free Trade Area (AfCFTA), and other regional trade blocs provides it with preferential trade access to growing regional markets. Kenya has strong telecommunications infrastructure and a robust financial sector and is a developed logistics hub with extensive aviation connections throughout Africa, Europe, and Asia. In 2018, Kenya Airways initiated direct flights to New York City in the United States.

In 2017 and 2018 Kenya instituted broad reforms to improve its business environment, including passing the Tax Laws Amendment (2018) and the Finance Act (2018), which established new procedures and provisions related to taxes, eased the payment of taxes through the iTax platform, simplified registration procedures for small businesses, reduced the cost of construction permits, and established a “one-stop” border post system to expedite the movement of goods across borders. However, the Finance Act (2021) increased the capital gains tax rate from five to 15 percent and introduced a provision to subject gains from financial derivatives earned by nonresidential persons to a 15 percent withholding tax. The Finance Act also introduced reporting requirements for certain qualifying multinational entities operating in Kenya. The oscillation between business reforms and conflicting taxation policies has raised uncertainty over the Government of Kenya’s (GOK) long-term plans for improving the investment climate.

Kenya’s macroeconomic fundamentals remain among the strongest in Africa as it continued to rebound from the COVID pandemic with real gross domestic product (GDP) increasing with over five percent growth in 2022. However, the economy faces elevated inflationary pressure due to a prolonged drought and global supply chain disruption caused by Putin’s brutal war in Ukraine.

Kenya is a regional leader in clean energy development with more than 90 percent of its on-grid electricity coming from renewable sources. Through its 2020, second Nationally Determined Contribution to the Paris Agreement targets, Kenya has prioritized low-carbon resilient investments to reduce its already low greenhouse gas emissions a further 32 percent by 2030. Kenya has established policies and a regulatory environment to spearhead green investments, enabling its first private-sector-issued green bond floated in 2019 to finance the construction of sustainable housing projects.

American companies continue to show strong interest to establish or expand their business presence and engagement in Kenya. Sectors offering the most opportunities for investors include: agro-processing, financial services, energy, extractives, transportation, infrastructure, retail, restaurants, technology, health care, and mobile banking.

Country Links

Capital Markets Authority (Kenya)

Central Bank of Kenya