Kenya is seeking KSh 564 million to exit the global watch list of the Financial Action Task Force (FATF) grey list by January 2027, which was imposed on the country in February 2024.
The bid to exit the watch list is being supported by the Parliament’s Finance Committee, which pledged to push for increased funding for the Financial Reporting Center (FRC).
During a meeting with the FRC, which monitors financial transactions and combats money laundering, the committee apprised members of the progress in implementing the 12 strategic points outlined by the FATF.
According to the Departmental Committee on Financing and National Planning, the 12 action plans were focused on rectifying the shortcomings flagged in the Kenya’s frameworks on Anti-Money Laundering, Counter Terrorist Financing, and Counter Proliferation Financing (AML/CFT/CPF).
“The action points are focused on rectifying weaknesses flagged in Kenya’s frameworks on Anti-Money Laundering, Counter Terrorist Financing, and Counter Proliferation Financing (AML/CFT/CPF), which led to the country being grey-listed in February 2024,” part of the statement by the parliament read.
Kenya Global Grey Listing
The European Commission placed Kenya on the global watch list of high-risk third countries due to deficiencies in the Anti-Money Laundering (AML) following the FATF designation in February 2024.
Further, the global grey listing of the country hinders Kenya from selecting foreign direct investments (FDIs).
In addition to hindrances to FDI, the listing threatens scrutiny of the country by multilateral lenders, including the IMF and the World Bank.
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FY 2026/2027 Fiscal cycle
During the committee meeting, Naphtaly Rono, the director-general of the Financial Reporting Center, revealed that the Financial Reporting Center had a tight budget cap imposed by the National Treasury.
Rono further argued that due to the tight budget, the center had no funds to execute its role in investigation and regulations effectively, thus the delay in meeting the May 2026 FAFT deadline.
Additionally, the director general explained that the center required a funding of up to KSh 2,498.7 million to perform its duty on the monitoring of Kenya’s financial system.
However, he noted that the center had currently been allocated KSh 765.5 million for the operation and had a KSh 1,733.2 million unfunded deficit.
The Financial Reporting Center director general, citing KSh 765.5 million, stated that the funds will be consumed by the fixed non-discretionary commitments at the center.
Further, the current allocation to the center will cover the required KSh 479.3 million for personnel emoluments, while an additional KSh 286.2 million will cover essential overheads.
According to Rono, the center currently has cut to the utilization of a minimum allocation of KSh 564.9 million to achieve a survivable operating baseline of KSh 1.33 billion.
“Our operational funds remaining stand at Zero,” Rono clarified on the defunded operational areas.
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Exiting Global Grey Listing Plan
In the attempt to exit the global watch list, the Financial Reporting Center warned that Kenya needs to have a well-funded exit plan without defunding the FAFT action plan.
Moreover, the exit plan is expected to protect Kenya’s stability in the financial sector and national security.
The FRC’s request for the additional KSh 564.9 million in the exit plan from the grey listing will enhance the centers’ role as a revenue enhancer.
As a revenue enhancer during the 2025 review period, the FRC had supported asset and tax recovery operations that assessed KSh 592 million, with KSh 308 million recovered.
However, according to the director general of the FRC, the center lacks the capital to analyze the 10,000-plus Suspicious Transaction Reports (STRs) and Suspicious Activity Reports (SARs) it receives annually, as evidenced by the 34 STRs processed in 2012.
To solve the unfunded operational areas of the FRC, the committee chairperson, Kuria Kimani, pledged that the committee will convene a meeting with the National Treasury reviewing the FY 2026/27 budget estimate.
