Kenya’s ongoing struggle to shake off international concerns over its anti-money laundering and counter-terrorism financing framework took another hit in February 2025 when the Financial Action Task Force (FATF) retained the country on its grey list. This was followed in June by the European Union’s decision to add Kenya to its own list of high-risk jurisdictions—aligning with FATF’s position and further intensifying global scrutiny.
A new publication by PwC Kenya’s Financial Crime Advisory team, titled “Kenya Retained on the Grey List after FATF’s February 2025 Plenary”, provides a detailed analysis of the reasons behind Kenya’s retention, the reforms made, and what more needs to be done.
Authored by Ivy Momanyi (Senior Associate), Brenda Guchu (Senior Manager, CAMs – Certified AML/CFT Specialist), and John Kamau (Partner) of PwC Eastern Africa, the report offers valuable insights into Kenya’s technical progress, remaining gaps, and the compliance burden now facing businesses.
Grey Listing: What It Means and Why It Matters
The FATF grey list includes countries with strategic deficiencies in their AML/CFT frameworks but which have committed to address these gaps under heightened monitoring. For Kenya, this designation has significant implications. Financial institutions must undergo enhanced due diligence, cross-border transactions face increased scrutiny, and investor confidence risks being eroded.
“The grey listing serves as a red flag to international financial markets. While Kenya has taken great steps in legislation, the effectiveness of these measures remains underwhelming,” PwC’s report cautions.
Substantial Legislative Progress—But Not Enough
According to PwC Kenya’s digest, Kenya has made commendable improvements in technical compliance since the 2022 Mutual Evaluation Report. Then, only 3 of the FATF’s 40 Recommendations were rated as Compliant (C) or Largely Compliant (LC). By December 2024, Kenya had improved to 28 C/LC ratings—thanks largely to the passage of the AML/CFT (Amendment) Act, 2023, which reformed 16 key laws including the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), Companies Act, and the Banking Act.
Key areas of improvement noted in the PwC report include:
- National coordination (Recommendation 2)
- Confiscation powers (R.4)
- Financial sanctions compliance (R.7)
- Politically Exposed Persons (PEPs) monitoring (R.12)
- Wire transfer controls (R.16)
- International cooperation and law enforcement powers (R.30–40)
Effectiveness Still Weak: The Core of Kenya’s Problem
Despite legislative progress, FATF noted that Kenya remains largely ineffective in applying these laws. Out of 11 Immediate Outcomes (IOs) used to assess the practical enforcement of AML/CFT measures, Kenya scored Low on 9 and Moderate on only 2.
PwC’s report emphasizes that “effectiveness is what truly matters for FATF. Kenya has built the house, but the rooms are still empty—it’s implementation that will get us off the grey list.”
Sticking Points: NPOs and Digital Assets
Two FATF recommendations where Kenya remains Non-Compliant are especially critical:
- Recommendation 8 – Oversight of Non-Profit Organizations (NPOs): Kenya has yet to identify and monitor NPOs vulnerable to abuse for terrorist financing.
- Recommendation 15 – New Technologies: The country lacks a regulatory framework for cryptocurrencies and virtual asset service providers (VASPs), despite growing adoption.
The PwC report notes that the Virtual Assets Service Provider Bill, introduced in January 2025, is a critical step forward. It proposes licensing crypto firms, mandating compliance with AML/CFT standards, and requiring enhanced reporting for large virtual asset transactions.
New Compliance Burdens for Business
Ugandan enterprises urged to explore regional oil and gas opportunitiesFor the private sector, the grey listing increases compliance pressure across all sectors. The 2025 AML/CFT (Amendment) Bill, already passed by the National Assembly and pending Senate approval, introduces:
- Expanded definition of reporting entities (including crypto and high-value asset dealers)
- Stricter Know Your Customer (KYC) requirements
- Real-time transaction monitoring
- Increased enforcement powers for the Financial Reporting Centre (FRC)
- Personal liability for non-compliant board members and senior executives
“These reforms mean that institutions can no longer afford to take a passive approach,” said Brenda Guchu in the PwC commentary. “Compliance is now a boardroom issue.”
EU Adds Pressure with High-Risk Tag
In June 2025, the European Union formally added Kenya to its list of high-risk jurisdictions, reinforcing FATF’s conclusions. This move compels European financial institutions to apply enhanced due diligence to transactions involving Kenyan entities, increasing the cost and complexity of doing business across borders.
The PwC authors note that “being on both the FATF and EU high-risk lists could delay foreign investment, constrain trade financing, and impact donor perceptions, especially in the development and humanitarian sectors.”
The Road Ahead: Compliance as a Strategic Imperative
Kenya’s next full FATF mutual evaluation is scheduled for 2031, but the country can exit the grey list earlier if it shows full implementation of its FATF Action Plan—including improvements in effectiveness.
John Kamau, Partner at PwC Eastern Africa, concludes: “The opportunity is now. Kenya’s legal architecture is in place. What’s needed is relentless execution and strong institutional coordination. Every stakeholder—government, regulators, private sector—has a role to play.”
PwC’s Advisory Role
PwC’s Forensic and Financial Crime team is actively supporting organizations to:
- Conduct AML/CFT risk assessments
- Build compliance frameworks
- Train teams on emerging threats
- Review and remediate KYC data
- Prepare for upcoming legislative and regulatory shifts
As the authors note, “Turning compliance into a strategic advantage is now a business imperative. The cost of inaction is simply too high.”
Conclusion: Grey Status, Golden Opportunity?
Kenya’s retention on the grey list is not just a setback—it’s a clear signal of what remains undone. Yet the progress made offers a strong foundation. With continued reforms and effective enforcement, Kenya can enhance its global financial reputation and reestablish trust with partners and investors.
For now, however, the grey cloud still lingers. Whether it becomes a storm or clears into opportunity will depend on how swiftly and seriously the country moves from compliance on paper to results in practice.
