CBK Steps Up Kenya Dirty Money Crackdown as EU and FATF Heighten Scrutiny on Non-Bank Institutions
As Kenya faces mounting pressure from international regulators, the central bank partners with the UK Treasury to strengthen oversight of non-bank institutions and curb the flow of illicit funds, aiming to restore confidence in the country’s financial system.
The Central Bank of Kenya (CBK) has partnered with the United Kingdom’s finance ministry as part of a broader Kenya dirty money crackdown, aimed at curbing illicit flows through non-bank financial institutions.
CBK Governor Dr. Kamau Thugge said the collaboration with His Majesty’s Treasury (UKHMT) focuses on a risk-based supervision framework to monitor deposit-taking microfinance firms, forex bureaus, and money remittance providers. “This has involved both virtual and in-person technical support from the UK Treasury. The framework is now fully operational and strengthens our capacity to address Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), and Countering Proliferation Financing (CPF) risks in non-bank institutions,” Dr. Thugge noted.
Kenya’s intensified efforts come after international scrutiny. In February 2024, the Financial Action Task Force (FATF) placed the country on its grey list for weak safeguards against money laundering and terrorism financing. More recently, the European Union added Kenya to its watchlist of high-risk third countries, signaling concerns over AML/CFT frameworks. This EU designation now requires Kenyan financial institutions to apply enhanced due diligence under the Fifth Anti-Money Laundering Directive, potentially raising transaction costs, slowing cross-border investment, and complicating relationships with European banks and investors.
“The EU’s inclusion of Kenya on its watchlist reflects ongoing gaps in regulatory enforcement and financial oversight,” said a European Commission spokesperson. “This is not punitive; it is preventative and aimed at strengthening global financial governance while protecting the EU’s financial system.”
The grey-listing and EU watchlisting carry real consequences for Kenya’s financial sector. Institutions face higher compliance costs, tighter scrutiny from correspondent banks, and potential impacts on Nairobi’s ambition to become a regional financial hub. Startups in fintech and digital finance, often reliant on foreign investment, could see onboarding and cross-border transactions delayed or more rigorously checked.
The CBK has responded with tangible action. By partnering with the UK Treasury, it has implemented frameworks similar to the UK–UAE Partnership to tackle illicit financial flows, aiming to reinforce AML/CFT enforcement, close compliance gaps, and restore investor confidence.
Dr. Thugge emphasized that Kenya remains committed to reforms: “Our measures strengthen the financial system’s defenses against illicit finance. By enhancing risk-based supervision and leveraging technical assistance from the UK Treasury, we are advancing the Kenya dirty money crackdown and addressing key action points needed for the country to exit the FATF grey list.”
As Kenya navigates heightened scrutiny from both FATF and the EU, regulators face the challenge of maintaining investor confidence, protecting the fintech ecosystem, and solidifying Nairobi’s role as a regional financial hub.
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