Kenya and Namibia are added to the list of 10 African nations under the FATF grey category.
Kenya and Namibia on FATF's Grey List: Focus on AML/CFT Improvements
Kenya and Namibia have found themselves on the Financial Action Task Force (FATF) grey list, a designation that requires them to address strategic deficiencies in their anti-money laundering (AML) and counterterrorist financing (CFT) regimes.
The grey listing of Kenya and Namibia means that these countries have committed to working with FATF to implement action plans within agreed timelines. The focus is on enhancing transparency, improving transaction reporting, addressing legislative and enforcement deficiencies, and implementing FATF action plans to effectively combat money laundering and terrorist financing within their jurisdictions.
Specifically, the requirements for these countries include addressing strategic shortcomings in their AML/CFT legal frameworks and enforcement practices to ensure better compliance with FATF standards. They are also expected to implement enhanced transparency measures, such as Kenya's requirement for companies and trusts to disclose beneficial ownership to increase corporate transparency.
Moreover, both countries are urged to enforce stricter reporting rules for large cash transactions to combat corruption, money laundering, and terrorism financing. For instance, Kenya’s policy requires dealers to report cash transactions exceeding $15,000.
FATF encourages a risk-based approach that accounts for progress made and remaining deficiencies, rather than automatically imposing enhanced due diligence measures on all transactions involving these jurisdictions. Additionally, FATF endorses avoiding undue disruption of legitimate humanitarian aid, nonprofit organization activities, and remittance flows in accordance with UN Security Council Resolution 2761 (2024).
In Kenya, the FATF has provided eight AML/CFT-related action plans, including developing a regulatory framework for virtual assets (governmental speak for crypto). The grey listing of Kenya is not a ban but does increase international scrutiny and potential sanctions if the country fails to address the identified issues. Kenya has shown a high-level political commitment to strengthen its AML/CFT regimes by working with FATF and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG).
The grey listing of Kenya is expected to have an impact on the country's financial sector, potentially affecting foreign investment and economic growth.
In Namibia, the Financial Intelligence Center (FIC) has expressed its commitment to addressing FATF's recommendations. FATF encourages improved collaboration between Namibia's financial and law enforcement agencies. The FATF has outlined eight areas of improvement for Namibia's anti-money laundering and counter-terrorism financing risk-based supervision. FATF recommends Namibia to strengthen inspections and enforce penalties for financial crimes. FATF also suggests Namibia to increase transparency in company ownership and reporting, and to enhance the Financial Intelligence Unit's capabilities.
The total number of African countries on FATF's grey list is now 12, accounting for approximately 57% of all grey-listed countries. Uganda has been removed from the FATF grey list, having been grey-listed since 2020. Kenya and Namibia have until October 2023 and an unspecified date, respectively, to implement the necessary reforms to be removed from the FATF grey list.
These measures reflect FATF’s approach of cooperative monitoring where Kenya, Namibia, and other grey listed countries work progressively to strengthen their regulatory and enforcement frameworks to meet international AML/CFT standards and reduce risks of illicit finance.
- The financial sector in Kenya might experience a potential shift as the country works on the FATF's eight AML/CFT-related action plans, including developing a regulatory framework for virtual assets (cryptocurrencies).
- Kenya's requirement for companies and trusts to disclose beneficial ownership aims to increase corporate transparency, an essential measure to combat money laundering and terrorist financing.
- The Focus in Namibia is on improving the collaboration between its financial and law enforcement agencies, strengthening inspections, and enforcing penalties for financial crimes.
- FATF has outlined eight areas of improvement for Namibia's anti-money laundering and counter-terrorism financing risk-based supervision, including enhancing the Financial Intelligence Unit's capabilities and increasing transparency in company ownership and reporting.
- While Kenya and Namibia have found themselves on FATF's grey list, they have shown a high-level political commitment to strengthen their AML/CFT regimes to address the identified issues.
- The FATF encourages a risk-based approach, taking into account progress made and remaining deficiencies, rather than automatically imposing enhanced due diligence measures on all transactions involving these jurisdictions, including those involving digital assets like Bitcoin and blockchain-based DeFi finance.
