EU Flags Kenya as High-Risk: What's at Stake?

Kenya was placed on the Financial Action Task Force's (FATF) "grey list" back in February 2024. The FATF is essentially the world's financial hall monitors. In essence, Kenya has been failing to prevent illicit money from entering its casinos and banks. The rules are somewhat in place, but no one really knows who owns what, and there isn't enough transparency enforcing them, and to be honest, combating financial crime appears to be more of a recommendation than a top priority.

Things are going to get messy now that the EU is joining the bandwagon. Investors will begin to look the other way, particularly the powerful European and American investors. There are additional requirements, paperwork, and "prove you're not a criminal" forms to fill out. Who would even enjoy that?

Kenya was attempting to position itself as the sleek new financial centre of Africa, but this? It's similar to wearing a sticker that reads "likely to commit fraud" to a job interview.

Furthermore, it goes beyond simply deterring investors. Do business with the EU? Anticipate delays. Due to the rain, all of those imports and exports will travel more slowly. Businesses and banks must verify everything twice. Kenyan banks will need to invest heavily in new compliance systems, recruit more lawyers, and train employees to recognize the money-laundering scourge that lurks in every transaction. That is expensive, and the customer typically bears the expense.

Relationships between banks and foreign partners are also in jeopardy. Do you want to continue doing business with a bank that has been flagged as risky if you are a large European bank? Not at all. Kenyan banks must therefore step up their game by tightening checks on new customers and improving transaction monitoring. It's terrible for people who only want to send money abroad or open a basic account.

But the Kenyan government isn't doing nothing. Reforms are being promised by the Central Bank and National Treasury. Trying to raise Kenyan laws to international standards, strengthening the Financial Reporting Centre, and enacting new regulations regarding who actually owns businesses.

Sounds good, but let's face it, the easy part is writing rules. The hard part is actually enforcing them. Cleaning up a system requires more than just a press conference. This is ultimately Kenya's "get your act together" moment. It will require more than just good intentions to get off that list. Kenya's financial reputation will continue to suffer unless there is genuine reform, real action, and actual follow-through.

To be honest, Kenya will be in the financial penalty box for a long time if the regulators and banks don’t work harder. The clock is ticking.