In what is turning out to be a déjà vu moment, the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) has for a second time raised concerns about Kenya's standing on the global stage in the fight against money laundering, terror financing, and proliferation financing (ML/TF/PF).
ESAAMLG raised similar concerns about 12 years ago, concerns that led to Kenya being placed in the list of countries that had strategic deficiencies in the fight against ML/TF/PF at the time. Every few years, ESAAMLG conducts a peer evaluation to assess its member countries' compliance with international anti-money laundering, counter-terrorism financing, and counter-proliferation financing (AML/CTF/CPF) standards.
This process is typically referred to as a mutual evaluation. ESAAMLG is affiliated to and works alongside the Financial Action Task Force (FATF), a global intergovernmental money laundering, terrorism financing and proliferation financing watchdog.
ESAAMLG recently conducted its second round of the Kenya mutual evaluation and released its report in September 2022. The report while acknowledging the strides Kenya has made, pointed out deficiencies in line with international standards. In 2010-2011, ESAAMLG had raised similar concerns about Kenya which contributed to its ‘greylisting’ by FATF.
FATF subjects the countries on the greylist to increased monitoring where they are given a timeframe to resolve the deficiencies. Failure could lead to more severe consequences such as being placed on a blacklist which could attract more sanctions.
Cross-border cash movements
Kenya, however, managed to secure its removal from the greylist in 2014 following concerted efforts and reforms to the AML/CFT/CPF regime.
Some of the areas where the recent ESAAMLG mutual evaluation highlighted deficiencies included understanding of the money laundering, terror financing and proliferation financing risks that Kenya faces.
The ESAAMLG evaluators acknowledged the National Risk Assessment but emphasised more needs to be done to better understand the risks.
The specific areas where the 2022 mutual evaluation report highlighted the need for a better understanding of the risk included risks emanating from politically exposed persons, virtual assets such as crypto curriencies, cross-border cash movements and non-govermental organisations.
Some subsets of NGOs are prone to abuse for terrorism financing. The report further brought to light the risk Kenya faces from proliferation financing and the need to pay attention to it.
Money laundering cases
Proliferation financing refers to the financial support provided for the spread or development of weapons of mass destruction, such as nuclear, chemical, or biological weapons.
The other broader deficiencies that the mutual evaluation pointed out included limited investigations and prosecutions of money laundering and terrorism financing cases, limited application of a risk-based approach at the national and institutional level, and gaps in establishing the beneficial owners of companies.
The greylisting notwithstanding, the recent mutual evaluation of Kenya's AML/CFT/CPF regime has underscored the urgency for further reforms. The mutual evaluation serves as a critical wake-up call. It's a call to action for all stakeholders to unite in implementing robust measures.
Embracing the mutual evaluation as an opportunity for constructive change will not only strengthen our country's financial integrity but also solidify Kenya's commitment to combatting illicit financial activities as a regional financial hub.