Kenya’s Bold Move to Exit FATF Grey List with Sweeping Anti-Money Laundering Reforms

In a significant move to get off the Financial Action Task Force (FATF) grey list, Kenya’s National Assembly passed the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2025, on April 16.

The Bill, which amends ten existing Acts of Parliament, aims to address longstanding technical shortcomings in Kenya’s legal infrastructure, particularly in combating money laundering, terrorism financing, and proliferation activities.

This legislative action comes at a critical juncture as Kenya grapples with its recent grey-listing by the Financial Action Task Force (FATF), signalling a renewed commitment to align with global financial standards.

A Legislative Response to Global Pressure

The passage of the Bill marks a pivotal moment for Kenya, which has faced increasing international scrutiny over its anti-money laundering (AML) and counter-terrorism financing (CTF) frameworks.

In February 2024, the FATF placed Kenya on its grey list, citing deficiencies in the country’s strategy for prosecuting money laundering offences and its broader AML/CTF regime.

This designation, as highlighted by Global Financial Integrity, poses significant risks to Kenya’s economy, potentially reducing foreign direct investment (FDI) inflows by 3 per cent, portfolio inflows by 2.9 per cent, and other investment inflows by 3.6 per cent of GDP—catastrophic figures for a nation already balancing trade deficits and a growing debt burden.

The Bill directly addresses these concerns by introducing amendments to key legislation, including the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), the Prevention of Terrorism Act, and the Betting, Lotteries, and Gaming Act, among others.

A notable provision expands the definition of “economic crime” to include the laundering of proceeds from corruption—a pervasive issue in Kenya, as identified in the National Risk Assessment (NRA), which also flagged fraud, forgery, and drug-related offences as major threats.

Strengthening Oversight and Accountability

One of the Bill’s cornerstone reforms is the empowerment of regulatory bodies to enforce compliance more effectively.

The Financial Reporting Centre (FRC), established under POCAMLA in 2009, gains greater operational independence, a move that echoes reforms introduced in the 2023 version of the Bill, which was signed into law by President William Ruto.

The FRC’s enhanced autonomy, achieved by excluding it from the definition of a State Corporation, aims to insulate it from political interference and improve its ability to monitor suspicious transactions.

Additionally, the Capital Markets Authority (CMA) has been granted expanded powers to ensure that its licensees adhere to AML/CTF regulations, a critical step given the increasing sophistication of financial crimes in Kenya’s capital markets.

The Bill also mandates the Central Bank of Kenya (CBK) to supervise financial institutions and their agents, further tightening the regulatory net.

This legislation reflects the the government’s broader agenda to restore Kenya’s credibility as a reliable regional and global financial partner—a reputation tarnished by the FATF grey-listing.

In 2023, Ruto signed a similar AML/CTF amendment into law, which introduced provisions for the extradition of fugitive criminals who consent to be transferred to requesting states. The 2025 Bill builds on this foundation, addressing gaps that persisted despite earlier reforms.

Economic and International Implications

Kenya’s grey-listing by the FATF has had tangible economic consequences, as noted in prior analyses. The decline in FDI and investment inflows threatens to exacerbate the country’s economic challenges, particularly its trade deficit and debt burden.

By addressing the technical deficiencies highlighted by the FATF, the Bill could pave the way for Kenya’s removal from the grey list, restoring investor confidence and stabilising the economy.

Moreover, the Bill’s focus on combating terrorism financing is particularly relevant given Kenya’s geopolitical context. As a key player in the East African region, Kenya has long been a target for terrorist groups, with financing networks often exploiting weaknesses in the financial system.

Strengthening the legal framework to disrupt these networks not only enhances national security but also positions Kenya as a leader in regional counter-terrorism efforts.

Despite the optimism surrounding the Bill’s passage, challenges remain. The effectiveness of the new legislation will depend on its implementation—a perennial issue in Kenya, where robust laws have often been undermined by weak enforcement and corruption.

The National Risk Assessment’s findings that recoveries from crimes like fraud and drug trafficking remain low compared to corruption-related recoveries underscore the need for a more aggressive prosecution strategy, an area where Kenya has historically lagged.

Additionally, while the empowerment of agencies like the FRC and CMA is a positive step, these institutions will require adequate resources and training to fulfil their expanded mandates. Without sufficient funding and capacity building, the reforms risk becoming symbolic rather than substantive.

The passage of the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2025, represents a critical step in Kenya’s journey toward financial integrity and global compliance.

By addressing deficiencies in its AML/CTF framework, Kenya is signaling to the international community its commitment to combating financial crimes and terrorism financing. However, the true test lies in the implementation of these reforms and the government’s ability to translate legislative intent into tangible outcomes.

As Kenya navigates the economic fallout of its FATF grey-listing, the stakes could not be higher. With the right political will, institutional support, and international cooperation, this Bill could mark a turning point in Kenya’s fight against financial crime, paving the way for a more secure and prosperous future.