In Kenya, many years of legal and institutional reforms and in 2025, the country is still placed on the Financial Action Task Force (FATF) greylist in regards to money laundering and terrorism financing. The continued existence of such categorization makes Kenya one of the countries which are still considered to have strategic weaknesses in their anti-money laundering (AML) and counter-terrorism financing (CTF) systems.
As the other countries like South Africa, Nigeria, Mozambique, and Burkina Faso have managed to leave the list by complying with the requirements of the list, Kenya remains greylisted, which undermines investor confidence and heightens the risk of operation of its financial institutions. Economic and reputational implication is that the greylist status means increased concerns to the international financial organization and development partners against Kenya.
The Roadmap to Conformity and Recovery of Credibility.
The process of reforming Kenya to come out of the FATF grey list relies on the effective implementation of reforms, as well as the effective performance of credible enforcement outcomes. It will be important to strengthen institutional independence, improve the coordination of agencies, and invest in advanced digital monitoring systems.
International cooperation is also of great importance. The increased cooperation with the global financial intelligence communities and the transparency of the high-risk areas to the population would help to restore the investor and institutional trust.
As FATF keeps tracking the progress of Kenya in 2025, the nation has a critical chance to re-align their anti-money laundering policy. This will require changing the legal reforms into tangible practice, making all the institutions of the people accountable, and upholding political dedication to integrity in law.
Kenya has demonstrated sufficient resilience on the money laundering watchlist to indicate more issues that are deeper than legislation-related-issues, touching on governance, enforcement capability, political will. The question is whether the reforms that will follow will have any tangible results or whether they will only support the trends of the past when it comes to compliance without commitment as Kenya tries to prove to the world that it has made some real progress. What is next to be done by Nairobi is the focus of global scrutiny as it may or may not be redefining its credibility in the international financial front.
Structural Challenges Behind Kenya’s Grey Listing
One of the main reasons why Kenya is still placed on the FATF greylist is the lack of successful convictions of money laundering and terrorist funding. Despite the laws that have already been formulated in the country and the investigations that have been run in this country, few convictions have been reached. The standards of FATF assessment focus on practical results, recovered assets, and criminal penalties instead of legislative presence.
The fact that Kenya borders Somalia and the frequent risk of extremist funding also increase the rate of scrutiny. Absent regular conviction rates and proven judicial independence, FATF regards Kenya enforcement mechanisms as not being full which invalidates its AML and CTF actions.
Inadequate Oversight Of High-Risk Sectors
The financial system of Kenya continues to have financial sectors that are loosely regulated and are therefore susceptible to unlawful financial operations. The real estate business is one of the most worrying areas since there are a lot of cash dealings and little disclosure of beneficial ownership. The assets associated with politically exposed individuals tend to evade a stringent examination procedure, which concerns global evaluators.
There is also criticism of non-profit organisations and informal money transfer systems in terms of lack of oversight. Although the Financial Reporting Centre (FRC) and the Central Bank of Kenya are carrying out monitoring activities, the inconsistent nature of control implementation is still leaving the country vulnerable to terrorist financing risks.
Compliance And Reporting Deficiencies
Kenyan financial institutions and banks are struggling to comply with international AML requirements. The addition of Kenya to the list of high-risk third countries in the European Union has caused the local banks to receive greater due diligence, which has caused delays and high costs of operation.
Gaps in reporting and identifying suspicious transactions are not only due to weak inter-agency coordination and limited ability to enforce them. The international correspondent banks, being cautious of compliance risks, have just curtailed their collaboration with the Kenyan institutions- a complicating factor that further isolates and makes transactions more expensive to the financial sector of the country.
Efforts And Gaps In Legislative And Institutional Reform
Kenya made changes to its Proceeds of Crime and Anti-Money laundering Act (POCAMLA) and Prevention of Terrorism Act in 2025 to ensure that its laws address FATF issues. These reforms increased predicate offenses, expanded supervisory authority and made violations more severe. These amendments have been presented by the government officials as reaffirmation of Kenya to global standards of compliance.
Nevertheless, the analyses carried out by FATF do not focus on formal legislation, but on its efficiency. Therefore, the reforms are a good intention, but they have yet to yield the actual results Kenya needs to be off the watchlist.
Institutional And Implementation Bottlenecks
There are still major challenges in the operations and coordination of the enforcement agencies in spite of the legal improvements. The office of the Director of Public Prosecutions (ODPP), the Directorate of Criminal Investigations (DCI) and the FRC tend to act in isolation thereby duplicating and delaying the investigation and prosecution process. Political interference and poor funding are yet another incident that undermines the credibility of the anti-corruption and AML activities in Kenya.
These problems are aggravated by the fact that investigators and prosecutors do not have specialized training. The lack of technical capacity even in the case of strong legal frameworks does not translate into the success of the case.
Lessons From Regional Peers
The continued stay on the grey list by Kenya is a contrast to the successful development of its other counterparts like Nigeria and South Africa who were delisted in 2025. The success of these countries was achieved through the focus on inter-agency coordination, the quantifiable outcomes of the enforcement, and the active work with the FATF evaluators.
An example of this is Nigeria, which increased the transparency of politically exposed accounts and South Africa where an inter-ministerial task force was created to coordinate AML activities. The case of Kenya highlights the necessity of enhancing legislative intentions into operational efficiency.
International Implications Of Continued Grey Listing
The economic consequences of Kenya being in the grey list are immense. There are increased compliance costs, delay in transactions and extra due diligence involved in the transactions involving the Kenyan entities on the part of the investors. These complications deter foreign direct investment and render international business operations unattractive.
In 2025, analysts cautioned that the continued grey listing would cripple the reputation of Nairobi as the East Africa financial hub. Reputational risks apply to a variety of industries: real estate, tourism, fintech where the trust of the investors is essential in the long-term development.
Diplomatic And Trade Repercussions
There are also the diplomatic and trade implications of the greylisting of Kenya. Financial cooperation is being more restrictive with development partners frequently pegging it on governance and transparency requirements. The improved risk ratings can also encourage the trade partners to impose some extra financial risks or limit access to credit facilities.
This reputational pressure makes the ambition of Kenya to be a regional economic leader difficult. The prolonged use of grey listing is likely to erode its position in the African Continental Free Trade Area (AfCFTA) and other regional trading blocs.
The Pathway Toward Compliance And Restoration Of Confidence
Kenya’s journey toward delisting from the FATF grey list depends on implementing reforms effectively and demonstrating credible enforcement results. Strengthening institutional independence, enhancing inter-agency coordination, and investing in advanced digital monitoring systems will be critical.
International cooperation remains equally important. Closer collaboration with global financial intelligence networks, along with public transparency in high-risk sectors, could help rebuild investor and institutional confidence.
As FATF continues to monitor Kenya’s progress in 2025, the country faces a pivotal opportunity to realign its anti-money laundering strategy. Success will depend on transforming legal reforms into visible action, ensuring accountability across public institutions, and maintaining political commitment to integrity-driven governance.
The endurance of Kenya on the money laundering watchlist reflects deeper structural challenges that go beyond legislation—touching on governance, enforcement capacity, and political will. As Kenya seeks to demonstrate measurable progress, the question remains whether upcoming reforms will yield tangible results or merely reinforce past patterns of compliance without conviction. The world’s attention now turns to Nairobi’s next move, which could redefine its credibility within the global financial community.