Kenya is racing against time to complete reforms that could secure its removal from the Financial Action Task Force (FATF) grey list by end of this month.
A key player on this mission told the Star that stakes are intentional and not merely for reputation.
"We are almost there. It is a generational commitment to ensure absolute transparency in the country's vast financial architecture," he said but declined to share more information.
An International Monetary Fund (IMF) study estimates that countries placed under FATF increased monitoring suffer an average decline in capital inflows equivalent to 7.6 per cent of GDP.
Given that latest estimates by the Kenya National Bureau of Statistics (KNBS) puts Kenya's total Gross Domestic) product (GDP) at Sh17.6 trillion, the country could be losing Sh1.3 trillion to grey list effects.
The IMF has identified pressures on correspondent banking, cross-border payments, trade and investment as possible channels through which the listing can affect an economy.
The urgency was underscored on Friday when Kenya established a multi-agency working group to identify and monitor non-profit organisations considered vulnerable to terrorism financing.
The move directly addresses supervision of the non-profit sector which remains one of the areas still outstanding in Kenya’s FATF action plan.
The working group comprises the Interior ministry, Attorney-General’s office, Public Benefit Organisations Regulatory Authority and Business Registration Service.
Other institutions include the Registrar of Societies, Director of Social Development, National Counter-Terrorism Centre and Financial Reporting Centre (FRC).
Its mandate includes identifying higher-risk organisations and coordinating risk-based monitoring.
They will also sensitise non-profit organisations, share intelligence and harmonise government action against terrorism-financing risks.
It is a significant development considering the latest FATF assessment flagged regulation and oversight of non-profit organisations as an unfinished part of Kenya’s reform agenda.
Kenya was placed under increased monitoring in February 2024.
This is after the global watchdog for Illicit Financial Flows (IFFs) concluded that the country had not made sufficient positive and tangible progress in addressing weaknesses identified in its 2022 mutual evaluation.
It said Kenya had met only two of the 40 FATF recommendations, largely compliant with one, partially compliant with 26 and non-compliant with 11.
On effectiveness, nine of the 11 immediate outcomes were rated at a low level, with only two achieving moderate effectiveness.
Among the most serious concerns were weaknesses in investigation and prosecution of money laundering.
Others include terrorism financing, supervision of financial institutions and designated non-financial businesses.
It also spotlighted beneficial ownership transparency, targeted financial sanctions and oversight of non-profit organisations.
But Kenya has since made measurable progress.
In its April 2024 follow-up review, 15 recommendations were re-rated.
Recommendations on money-transfer services, supervisory powers, reporting of suspicious transactions, internal controls, international cooperation and other areas moved from non-compliant or partially compliant to higher ratings.
A further August 2024 review re-rated another 14 recommendations.
Money laundering offences, confiscation, customer due diligence, reporting of suspicious transactions, law-enforcement powers and financial intelligence were among areas that achieved compliant or higher ratings.
Nevertheless, Kenya remained under enhanced follow-up
"The reforms have continued," Director of Public Prosecutions, Renson Ingonga said last month when he chaired a high-level meeting to assess Kenya’s progress ahead of the next stage of the country’s engagement with the global financial crime watchdog.
The meeting was attended by top security, financial intelligence and anti-corruption agency officials.
According to Ingonga, the Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2025, amended several laws covering professions and sectors exposed to illicit finance such as accountants, estate agents, betting and gaming, public benefit organisations, retirement benefits and SACCOs.
Kenya also enacted the Virtual Asset Service Providers Act in 2025, creating a framework for licensing and supervising cryptocurrency and other virtual-asset businesses.
"The law places virtual asset providers under AML, counter-terrorism financing and counter-proliferation financing obligations and gives regulators powers to inspect, monitor and enforce compliance."
Ingonga said the law is important given that rapid expansion of digital finance has created new channels for financial crime.
Investigations involve mobile money, bank transfers and cryptocurrencies as authorities keep pace with technology.
Kenya has also strengthened its beneficial ownership framework.
Regulations require limited liability partnerships to maintain registers identifying natural persons who ultimately own or control them.
"This addresses longstanding FATF concern over opaque corporate structures," says Reuben Kinyanjui, an anti-illicit financial flows crusader.
The Financial Reporting Centre has simultaneously expanded guidance for reporting institutions, including banks, casinos, real-estate agencies, accountants, lawyers and trust and company service providers.
The centre's boss Naphtaly Rono says its current guidance includes targeted financial sanctions, suspicious transaction reporting and risk assessments for money laundering and terrorism financing.
The country has also increased efforts to turn financial intelligence into actual enforcement.
Job Adak from Trust Africa, an anti-IFFs lobby says the shift is critical because FATF's assessment is increasingly about effectiveness, not simply the number of laws passed.
"The global watchdog's methodology requires countries to demonstrate that their legal and regulatory frameworks are being used effectively to detect, investigate and prosecute financial crime."
This, he said remains Kenya's biggest challenge.
In its latest review in June 2026, FATF acknowledged that Kenya had improved understanding among financial institutions and designated non-financial businesses of targeted financial sanctions.
However, it wants the country to improve risk-based supervision, increase suspicious transaction reporting, strengthen the quality and use of financial intelligence.
The watchdog wants East Africa's economic super house to tighten money-laundering investigations and prosecutions, improve beneficial ownership information and resolve gaps in targeted financial sanctions.
FATF also retained its concern over the regulation and supervision of trusts and the need for a risk-based framework for non-profit organisations.
The February 2026 review had recognised other gains, including stronger supervisory capacity, a legal framework for virtual-asset service providers and a sustained increase in terrorism-financing investigations and prosecutions.
"Kenya has moved substantially on technical compliance, but now has to prove effectiveness," the report says.
The reforms are already yielding dividends for Kenya.
The UN Trade and Development data shows Kenya attracted a record $3.2 billion (Sh414 billion) in FDI in 2025.
The inflow was up from a revised $2.32 billion in 2024 and $1.5 billion in 2022, representing a 37.7 per cent increase in one year and more than double the 2022 level
Kenya is not alone in facing the pressure of FATF increased monitoring.
As of the June 2026 review, 22 jurisdictions were on the grey list, including Angola, Cameroon, Côte d'Ivoire, Democratic Republic of Congo, South Sudan, Bulgaria, Lebanon, Nepal, Vietnam and Venezuela.
Several countries, however, have demonstrated that exit is possible.
In June 2026, FATF removed Algeria and Namibia after on-site visits confirmed that both had completed their action plans within agreed timelines.
In October 2025, Burkina Faso, Mozambique, Nigeria and South Africa were also removed, while Tanzania, Mali and Croatia exited in June 2025.
The Philippines was removed in February 2025.
Uganda exited the grey list in February 2024.
At the other end of the scale is FATF's much smaller “call for action” list, commonly described as the blacklist.
As of June 2026, it comprised North Korea, Iran and Myanmar.
FATF considers these jurisdictions to have serious strategic deficiencies and calls for enhanced due diligence, with countermeasures against the most serious risks.
The wider illicit-finance drain fight extends beyond attracting investment. It is also about stopping money from leaving Africa through illicit channels.
UNCTAD estimates that about $88.6 billion leaves Africa every year through illicit capital flight, equivalent to about 3.7 per cent of the continent's GDP.
The UN agency says the amount is almost as large as the combined annual inflows of official development assistance and foreign direct investment received by African countries in the period studied.
It puts Africa's annual financing gap for achieving the Sustainable Development Goals at about $200 billion.
"Curbing illicit financial flows could therefore provide a significant source of domestic development finance while reducing pressure on borrowing and external aid," UNCTAD said.
