Kenya Cracks Down On Crypto To Avoid Financial Blacklist

The Kenyan government is implementing measures to regulate cryptocurrency trading due to concerns regarding money laundering and terrorism financing. This move comes as the country seeks to avoid being added to the Financial Action Task Force (FATF) “grey list,” which includes nations under increased scrutiny for potential financial crimes.

FATF maintains a “grey list” of nations deemed at higher risk of money laundering and financing of terrorism. These countries, currently including South Sudan, Tanzania, Uganda, and Sudan, face increased monitoring and possible sanctions. Kenya is currently under evaluation for potential inclusion on this list.

Kenya has witnessed a growing use of cryptocurrencies yet lacks regulations. This raises concerns about money laundering and terrorism financing. The platforms allow traders to transact directly with one another without the need for a centralized third party to facilitate the transactions.

A technical working group, formed to advise the Treasury on cryptocurrency, is finalizing draft regulations to be presented to the Cabinet for approval to address vulnerabilities within Kenya’s financial system.

“Right now, there is a sectoral working group that is developing a policy document to guide the creation of a legal framework which will prescribe what needs to be done and who will regulate digital assets providers,” said the Financial Reporting Centre (FRC) director-general, Saitoti Maika.

Kenya was assessed by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) in 2022, and the FATF identified areas for improvement. The country had one year to address these concerns, and the deadline passed in October 2023. The FATF will evaluate Kenya’s progress this week.

If significant gaps remain, the country could be added to the grey list, which carries increased monitoring and potential reputational damage. “The concern has been that Kenyans are trading and yet we don’t know, as a country, to what extent the proceeds that flow in this space are likely to get into the financial system. We are being reminded that as we become more sophisticated as a country, we have to deal with the risks,” said Mr. Maika.

The FATF plenary and working group meetings are currently taking place this week in Paris, France. During these meetings, Kenya will receive feedback on the progress the country has made in enhancing the integrity of its financial system.