Kenya taken off watchlist on money laundering, terror financing

Money Markets

Kenya has been taking several steps to counter money laundering and financing of terrorism in its financial services sector. Photo/FILE 

By MUTHOKI MUMO

In Summary

• Country credit rating expected to shoot up
• This will boost the country’s ambitions to become an African financial hub.
• According to Central Bank governor Njuguna Ndung’u, the removal of Kenya from the “dark grey list” will also improve the creditworthiness of the country and local financial institutions.

Kenya has been removed from a watch list of countries that are not sufficiently combating money laundering and terror financing.

This will boost the country’s ambitions to become an African financial hub.

 

In a statement last week, the Financial Action Taskforce said legal and regulatory reforms in Kenya meant that the country would no longer be subject to compliance monitoring.

This reduces the risk associated with the country as an investment destination and will have ripple effects on capital flows in the private sector as well as economic growth.

“Businesses usually factor the risk of failing to meet the taskforce standards in their decisions. This will no longer be the case in Kenya,” said Mr Jackson Kitili, interim director of the Financial Reporting Centre.

According to Central Bank governor Njuguna Ndung’u, the removal of Kenya from the “dark grey list” will also improve the creditworthiness of the country and local financial institutions.

“It means it is easier for correspondence bank facilities, easier to negotiate competitive rates for international credit and above all, the credit and risk rating for the country is now positively enhanced,” said Prof Ndung’u.

Sets standards

The Financial Action Taskforce sets standards for anti-money laundering and counter-terrorism financing and monitors progress in implementation of these standards worldwide.

A 2010 evaluation of Kenya’s performance against the taskforce’s recommendations revealed that the country was faring poorly. The Proceeds of Crime Anti-Money Laundering Act was yet to be implemented adequately; there was no financial intelligence unit nor a legal framework on terrorism financing.

READ: Agency seeks Kenya removal from global terrorism watchlist

Two years later, Kenya was nearly blacklisted for failing to meet Financial Action Taskforces’ standards. This would have seen the country categorised at par with Iran and North Korea.