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Budget cuts hit Kenya’s fight against dirty cash
Kenya was grey-listed in February 2024 by the Financial Action Task Force (FATF) —a global anti-money laundering and terrorism financing watchdog— which cited shortcomings in the country’s financial oversight systems.
The Financial Reporting Centre (FRC) is struggling to register non-financial firms and enforce compliance largely due to insufficient budget allocations, a situation that is undermining the war on money laundering.
The agency carried out a paltry 44 inspections of designated non-financial businesses and professions (DNFBPs) such as real estate agents and lawyers, as well as non-banking financial institutions in the year ended June 2025. This fell short of FRC’s annual target of 487.
Registration of financial reporting entities also fell short of the goal by more than half. This was after FRC registered 455 entities against a target of 990.
The shrinking resource envelope constrained inspections, outreach, and the registration of reporting entities. Documents from the Treasury show funding to the watchdog has steadily reduced.
The FRC’s budget fell from Sh1.70 billion in the 2022/23 financial year to Sh1.29 billion in 2023/24, before dropping to Sh570 million in the last fiscal year.
FRC spent Sh670.3 million in the last financial year, down from Sh781 million in 2023/24 and Sh1.337 billion in 2022/23.
The under-performance comes as Kenya faces heightened scrutiny over the effectiveness of its anti-money laundering and counter-terrorism financing framework.
Under the framework, cash transactions of $15,000 (about Sh1.94 million) and above, as well as cross-border transfers of $10,000 (Sh1.29 million) or more, must be reported to the FRC.
The reporting entities are also required to report suspicious transactions regardless of the amount involved. Limited inspections and delayed registration, however, raise concerns that such reporting obligations are not being consistently enforced.
The FRC says criminals are adapting faster than regulators. It adds that suspects increasingly rely on shell companies to conceal beneficial ownership and the true source of funds, while others split large transactions into small amounts to avoid reporting thresholds and detection.
Anti-corruption advocates say criminals, corrupt officials and business people hide illicit wealth in real estate, often using legal entities or trusts to mask ownership.
FRC says many individuals and firms are practising as real estate agents without registering, thus creating loopholes that ease the flow of illicit funds.
Registration is mandatory for casinos, accountants, advocates and dealers in precious metals and stones, as well as financial institutions such as banks, digital credit providers and online foreign exchange managers.
