AFTER FOURTEEN YEARS KENYA GETS GREY LISTED BY THE FINANCIAL ACTION TASK FORCE.
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1.0 INTRODUCTION
Established in 1989, the Financial
Action Task Force (FATF) as an intergovernmental organization leads global
action to combat money laundering, terrorist and financial proliferation.[1] The
FATF assesses and monitors how countries are taking effective measures to
combat money laundering and terrorist financing. Through the standards set to
combat the financial proliferation and money laundering, the FATF holds
countries accountable through identification and listing of countries depending
on their risks to compliance.[2]
Countries can either be
black-listed, grey-listed or white-listed. Countries listed on the FATF’s
“White List” are recognized for their adequate measures against money
laundering and terrorist financing. These countries are known for their strong
legal frameworks and enforcement actions, and they actively participate in
international cooperation on these issues.[3] For
countries in the “Grey List”, comprises of countries that are under increased
monitoring by FATF to ensure the standards set are fulfilled as their
strategies to combat money laundering are deficient. These countries have,
however, made political commitments within a specified timeframe to rectify
these shortcomings. The “Black List” countries are on the other hand high risk
jurisdictions that are not in compliance with the set standards and no efforts
to fulfil their obligations.[4]
When evaluating a nation's Anti
Money Laundering or Combatting Financing of Terrorism regime, the FATF depends
on its regional affiliate organizations, referred to as the FATF-Style Regional
Bodies.[5]
These bodies are responsible for conducting assessments on countries and
generating Mutual Evaluation Report. The report influences the listing of the
countries depending on its findings.
1.1
KENYA GETS GREY LISTED BY THE FATF
On 23rd February 2024,
Kenya was “Grey -Listed” by the FATF. Kenya, as indicated in its Mutual
Evaluation Report, reflected inadequate systems for the filing, analysis, and
subsequent follow-up of Suspicious Transactions Reports. The increase in
technological methods of financial transactions created deficiencies in
regulating the sanctity of financial transactions.[6]
Following the actions of the
Financial Action Task Force to grey list Kenya, much efforts to remedy the
deficiency have been sought by the government. This includes seeking assistance
from the International institutions and the blocs. This is to include the
Bretton Woods, western allies, the World Bank and the International Monetary
Fund.[7] This
was so communicated by the Treasury Cabinet Secretary Njunguna Ndung’u to the
National Assembly’s debt and Privatisation Committee. In her words, “… I had a meeting of bilateral
and multilateral lenders who have expressed support to ensure our country is
taken out of the grey list. We have done the legal instruments that established
four critical institutions that now need capacity building to effectively
combat money laundering, terrorism financing and proliferation of weapons of
mass destruction”.
1.2
AN ANALYSIS OF THE POSSIBLE RISKS THAT KENYA WOULD ENCOUNTER POST GREY LISTING
DONE BY THE FATF
The FATF which is the global
watchdog to sniff out money laundering and financing of terrorism in the states
has sought to closely monitor and cooperate with the country so as to get it
back on the white list. The monitoring will ensure that the country conforms
with the anti-money laundering, combating the financing of terrorism and
countering the proliferation of weapons of mass destruction. In a normal
instance the action would also affect the credit rating of the country but the
Cabinet secretary communicated that the same will not Kenya’s.[8]
However, when relating with other countries economically, strict due diligence
will be expected from Kenya.[9]
1.3
REGULATIONS MEANT TO BOUNCE BACK KENYA ON THE WHITE LIST
Some of the regulations set forth by
the treasury are those to ensure compliance with the Anti-money laundering and
combating of Terrorism Financing laws. Such laws include POCAMLA of 2013. The
fruition of these laws is well precedents by the impact it had after Kenya had
been grey listed in 2010 and successfully removed four years after. Despite the
nature of the laws to combat the deficiencies, as of 2016, there were
weaknesses identified by the Central Bank of Kenya which flagged the bank for
informal and anonymous cash flows that to a large extent made the bank
susceptible to money-laundering and terrorism.[10]
To counter these activities, there
was an introduction of guidelines that required someone transacting at least
$10,000 to disclose the source of the cash, the recipient of the money, the
manner in which the money will be spent and the direct and indirect
beneficiaries of the money.[11]
These guidelines received resistance especially by the executive who argued
that they were inconveniencing many businesses but the same did not change the
focus of the CBK. Later there was the establishment of the Assets Recovery
Agency tasked with recovery of the proceeds of crime and money laundering.
In a bid to conform with the FATF
standards, in 2023 a bill was brought up to relax the cap for one to cash
report from $10,000 to $15,000. More agencies to register with the anti-money
laundering watchdog have been added to include the real estate agencies, Sacco,
casinos, forex bureaus, life insurance brokers, institutions dealing with
precious stones, sole accountants and the non-government organization.[12]
At the management of these
institutions they will be expected to have an officer reporting incidences of
money laundering. The officer shall be independent of influence by the
organizations dealing and will be expected to submit in case a reporting is
done faulting the institution of money laundering. Power is also given to the
IRA and the Capital Market Authority who are expected to ensure compliance of
their licensees. The CBK has also been tasked in the new amendments to vet the
beneficiaries of the banks together with the directors and senior managers.
Those faulting in exercising the law
as stipulated in the Bill will be susceptible to a jail term of up to five
years and/or a fine of 50% of the flagged cash volumes.[13] The much
changes sought by the government is partly because of its position in the east
African trading bloc and the rise in fintech. However, the much efforts to
implement the amendments as set relating to this, the treasury CS has set it
out that we are yet to conform fully thus making Kenya subject to grey listing.[14]
The flagging by the watchdog was
mainly because of the many event of illicit selling of precious stones such as
gold, transit of drug and wildlife traffickers.[15] All these
have been seen to be enabled by the law firms, casinos and real estate agents.
Despite the involvement of law firm, the LSK has made a clear reservation as to
its obligations to reveal instance of money-laundering and financing of
terrorism mainly because of advocate-client privilege.
1.4
CONCLUSION
The grey listing of Kenya by the
FATF serve as a wake-up call for Kenya to strengthen its anti-money laundering
and counter–terrorism financing measures. From the analysis given by the CS it
is quite clear that as a country we have enough laws, regulations and policies
to keep us off the list but ardent implementation is a major deficiency. Kenya
need to adequately cooperate with the international institutions to get it back
in the white list. Such decisive action will strengthen its financial capacity
and uphold its reputation with the global community.
.
[1] ‘History of the FATF’
(www.fatf-gafi.org) https://www.fatf-gafi.org/en/the-fatf/history-of-the-fatf.html >accessed 5 March
2024.
[2] ibid.
[3] Brenda Guchu, ‘The FATF
Grey List: An Explainer’ (PwC) https://www.pwc.com/ke/en/blog/fatf-grey-list.html > accessed 5 March
2024.
[4] ibid.
[5]‘Jurisdictions under
Increased Monitoring - 23 February 2024’ (www.fatf-gafi.org)
https://www.fatf-gafi.org/en/publications/High-risk-and-other-monitored-jurisdictions/Increased-monitoring-february-2024.html .
[6] ibid.
[7] IMF, World bank to help Kenya
get out of dirty grey list, <www.businessdailyafrica-com.cdn.ampproject.org > accessed on 3rd
day of March 2024.
[8] Ibid.
[9] Ibid.
[10] Charles Mwaniki, what has
changed in new anti-money laundering rules,(2023,Business Daily Africa)< https://www.businessdailyafrica.com/bd/economy/what-has-changed-in-new-anti-money-laundering-rues--4388720 > accessed on 3rd
day march 2024.
[11] Ibid.
[12] Ibid.
[13] Ibid.
[14] IMF, World bank to help Kenya
get out of dirty grey list, <www.businessdailyafrica-com.cdn.ampproject.org > accessed on 3rd
day of March 2024
[15] Ibid.
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