Lawmakers have recommended an additional Sh388.16 million allocation to Kenya’s anti-money laundering agency for the fiscal year starting July to rescue Kenya from the global dirty money “grey list” and avert deeper scrutiny of its financial system.
The National Assembly’s Departmental Committee on Finance and National Planning said the funding is intended to strengthen operations at the Financial Reporting Centre (FRC) and help Kenya close compliance gaps identified by the Financial Action Task Force (FATF), the global anti-money laundering watchdog.
Kenya was placed on the FATF grey list on February 23, 2024, after the global watchdog flagged weaknesses in the country’s systems for combating money laundering, terrorism financing and illicit financial flows.
The watchdog cited failures in prosecuting money laundering cases, weak oversight of virtual assets and cryptocurrencies, and inadequate monitoring of non-profit organisations and beneficial ownership structures in Kenya.
Grey-listing does not trigger sanctions, but signals weaknesses in safeguards against illicit finance, prompting foreign investors and international financial institutions to subject transactions from affected countries such as Kenya to enhanced checks.
Failure to satisfy FATF requirements could expose Kenya to heightened international scrutiny, slower cross-border transactions and increased compliance costs for banks and businesses.
The parliamentary committee, in its report on the 2026-27 budget estimates to the House, recommended the extra allocation “to support the FRC to enhance operations and close the FATF implementation gap and remove Kenya from the grey list”.
The move comes after the FRC warned lawmakers earlier this month that its current budget is insufficient to sustain basic operations, threatening Kenya’s campaign to exit the FATF watchlist.
Treasury PS Chris Kiptoo has since pledged that Kenya will intensify reforms and work to exit the grey list by this May, warning there may be little room for extension.
“We really need to work hard. I am not sure we can have the opportunity to extend the greylisting period,” said Dr Kiptoo in February.
The proposed allocation by MPs follows disclosures by FRC Director-General Naphtaly Rono, who told the parliamentary committee that the agency’s current allocation in the budget estimates effectively left the agency paralysed.
The FRC had initially requested Sh2.49 billion for the financial year beginning July, but was allocated a budgetary ceiling of Sh765.5 million, leaving a funding gap of Sh1.73 billion.
Mr Rono said the anti-money laundering authority had revised its requirements downward and needed at least an additional Sh564.9 million to attain a minimum operational threshold of Sh1.33 billion.
He told the lawmakers that the allocation in the Budget estimates before the National Assembly would be fully consumed by salaries and fixed administrative expenses, leaving no money for investigations, inspections or intelligence analysis.
Personnel costs require Sh479.3 million, while office rent, utilities, insurance and staff medical cover account for another Sh286.2 million, Mr Rono said.
“Our operational funds remaining stand at zero,” Mr Rono had told the committee. “We cannot exit the grey list without a well-funded exit plan.”
The disclosures have exposed the widening gap between Kenya’s anti-money laundering commitments and the shrinking resources available to the agency spearheading the effort.
The FRC’s budget has steadily declined over the past three financial years, falling from Sh1.70 billion in 2022/23 to Sh1.29 billion in 2023/24 before dropping further to Sh570 million in 2024/25 fiscal year.
The shrinking budget has constrained inspections, delayed registration of reporting entities and reduced public outreach programmes, raising concerns over enforcement gaps in Kenya’s financial system.
Kenya’s anti-money laundering framework requires banks, financial institutions and designated reporting entities such as law firms, real estate agencies, NGOs, casinos and betting firms, to flag suspicious financial activity to the FRC.
Cash transactions worth $15,000 (about Sh1.94 million) and above, as well as cross-border transfers exceeding $10,000 (Sh1.3 million), must be reported.
Institutions are also required to report suspicious transactions regardless of the amount involved.
However, the FRC says it currently lacks the resources to process the more than 10,000 Suspicious Transaction Reports (STRs) and Suspicious Activity Reports (SARs) it receives annually.
The figure marks a dramatic increase from the 34 reports handled when the agency was established in 2012, reflecting the rapid expansion and complexity of Kenya’s financial system.
The FATF grey listing has intensified pressure on Kenyan authorities to tighten oversight of financial flows amid growing concern over illicit cash movements, terrorism financing and abuse of emerging digital payment systems.
Kenyan banks and financial institutions already enforces stricter customer due diligence requirements, including verification of beneficial ownership and enhanced monitoring of high-risk transactions.
Authorities have also adopted an inter-agency enforcement strategy involving the Directorate of Criminal Investigations, the Attorney-General’s office, the Asset Recovery Agency and the Business Registration Service.
The additional Sh388.16 million proposed by MPs is expected to partially restore operational capacity at the FRC, although it still falls short of the amount the agency says it requires to function effectively.
The parliamentary committee’s recommendation sets the stage for a wider budget battle as lawmakers weigh competing spending priorities against growing international pressure to strengthen Kenya’s financial crime enforcement regime.
