Kenya remains under intense international scrutiny for money laundering risks, as several of its African peers have exited such watchlists due to advancements in their anti-money laundering (AML) frameworks. Despite significant reforms underway, Kenya was added to the European Union’s (EU) high-risk third-country watchlist in mid-2025, highlighting ongoing strategic deficiencies in its AML and counter-terrorism financing (CFT) regimes. This article explores Kenya’s current status on global money laundering watchlists, the implications of the listings, the government’s reform efforts, and how Kenya compares with other African nations that have recently exited similar scrutiny lists.
Kenya’s Continued Presence on Money Laundering Watchlists
In June 2025, the EU formally included Kenya among its high-risk third countries with money laundering and terrorism financing vulnerabilities. The listing aligns with the Financial Action Task Force’s (FATF) designation of Kenya as a jurisdiction under increased monitoring—commonly referred to as the grey list—which Kenya has been on since February 2024. The EU’s decision puts Kenya in the same category as countries with noted AML/CFT regulatory deficiencies such as Algeria, Angola, Côte d’Ivoire, Namibia, and Venezuela.
According to the EU Commission, Kenya “has strategic deficiencies in its anti-money laundering and counter-terrorism financing regimes that pose significant threats to the EU’s financial system.” As a result, financial institutions across the EU are required to undertake enhanced due diligence measures when engaging with Kenyan businesses and entities, as mandated by the EU’s 2015 AML Directive (Article 18a). This step aims to mitigate risks posed by Kenyan transactions to the integrity of the broader EU financial system.
Impact on Kenya’s Financial Sector
The inclusion on this watchlist amplifies scrutiny on Kenya’s financial system, especially in cross-border transactions and EU-linked investments. European banks and financial institutions now apply stricter controls on dealings with Kenyan clients, which could slow transaction times and increase compliance costs. This is particularly significant for Kenya’s fintech sector and digital financial startups that rely heavily on international capital, including from EU sources.
Kenya’s Financial Reporting Centre (FRC) reported a staggering 14,000 suspicious transaction reports (STRs) filed from 2021 to 2023, involving nearly 7 trillion Kenyan shillings (approx. USD 53 billion). Most flagged transactions—around 91%—flowed through regulated banks, exposing systemic gaps in both public and private sector vigilance. The money laundering tactics reported include extensive use of shell companies, transaction structuring, and informal value transfer systems.
Government Response and Reform Efforts
In response to international pressure, Kenyan authorities have embarked on sweeping reforms aimed at addressing AML/CFT gaps. The Treasury Cabinet Secretary, John Mbadi, has been at the forefront of consultations with international regulators, committing to reforms that align Kenya’s legal and financial supervision frameworks with FATF recommendations.
One key milestone is the 2025 amendment to Kenya’s Anti-Money Laundering Act, which introduces stringent measures targeting emerging risks, including virtual assets and complex corporate structures often exploited in money laundering schemes. The government has also increased resources for supervisory bodies and enhanced cross-border cooperation with international agencies.
The EU has stated its approach as preventive rather than punitive, offering technical assistance and reform support to Kenya. The objective is to help Kenya improve regulatory enforcement and strengthen transparency mechanisms, which will ultimately enable the country to exit the grey and high-risk watchlists.
Africa’s AML Landscape: Kenya vs. Peers
Kenya’s prolonged presence on the EU and FATF watchlists contrasts with several African nations that have successfully exited similar lists through comprehensive reforms. Countries like Senegal, Uganda, and the United Arab Emirates, which were once on such watchlists, have substantially improved their AML/CFT frameworks and were delisted by the EU in 2025. These nations managed to close regulatory gaps, enhance supervisory oversight, and demonstrate effective enforcement, providing a blueprint for Kenya.
In comparison, Kenya continues to face challenges due to factors such as informal financial networks, limited enforcement capacity, and rapid innovation in fintech that outpaces regulatory controls. While peer countries have accelerated progress, Kenya’s large and complex financial ecosystem, coupled with persistent enforcement issues, has prolonged enhanced scrutiny.
Broader Implications for Kenya’s Economy
The watchlist status carries increased reputational risk that may deter foreign investment, elevate borrowing costs, and affect Kenya’s integration with international financial systems. It may also encourage caution among correspondent banks and financial partners, which could lead to de-risking or withdrawal of services affecting remittances, trade finance, and cross-border payments.
However, the designation also serves as a catalyst for strengthening Kenya’s financial integrity. By addressing the highlighted weaknesses and adopting international best practices, Kenya aims to bolster investor confidence, safeguard its financial sector from illicit flows, and align with global AML standards.
Conclusion
Kenya’s inclusion on the EU’s high-risk money laundering watchlist underscores the country’s ongoing struggle to fully address AML/CFT deficiencies, even as several African peers have successfully exited such scrutiny through reforms. The government has committed to sweeping legislative and regulatory reforms, supported by international cooperation to improve enforcement and transparency.
The listing triggers enhanced due diligence by EU financial institutions, increasing scrutiny on Kenyan transactions and posing challenges for the country’s financial sector, especially its burgeoning fintech industry. Nonetheless, with focused reforms, technical assistance, and sustained political will, Kenya has a path to restore full compliance, regain international trust, and eventually exit the watchlists that constrain its financial reputation.