Authors
On June 10, 2025, the European Commission formally added Kenya to its list of high-risk third countries for Anti-Money Laundering, Combating the Financing of Terrorism, and Countering Proliferation Financing (AML/CFT/CPF) deficiencies. The decision, part of an amendment to Delegated Regulation (EU) 2016/1675, follows Kenya’s continued grey listing by the Financial Action Task Force (FATF) and signals deep concern about the country’s vulnerabilities to financial crime. Alongside Kenya, the Commission added nine other jurisdictions, while removing eight, including the UAE, Uganda and Panama, citing progress on structural AML reforms.
While the EU listing is not a sanction per se, it is far from symbolic. In regulatory terms, it is a binding designation with immediate legal and financial consequences across the entire EU market. For a country like Kenya, East Africa’s financial, innovation, and trade hub, the cost is both reputational and operational. The listing triggers mandatory enhanced due diligence (EDD) for any financial or business relationship between EU based institutions and Kenyan clients. This places Kenyan banks, fintechs, exporters, and professional service firms under a much harsher compliance spotlight, potentially complicating even the most routine transactions.
The EU’s assessment is grounded in Directive (EU) 2015/849, which requires the Commission to identify countries with “strategic deficiencies” in their AML/CFT frameworks that pose a significant threat to the EU financial system. While the EU relies heavily on FATF evaluations, it also conducts autonomous assessments to determine whether a jurisdiction should be listed. In Kenya’s case, the signal is clear: the current AML/CFT/CPF framework is not strong enough to prevent the laundering of illicit funds or the financing of terrorism, especially when tested against global and EU-specific standards.
Practically, the listing means that EU based banks, auditors, lawyers, crypto firms, and other “obliged entities” must now implement heightened verification protocols when onboarding or transacting with Kenyan clients. These requirements include collecting more detailed documentation on corporate structures and beneficial ownership, verifying the source of funds and wealth, obtaining senior management approval before engaging, and continuously monitoring the business relationship for red flags. For Kenyan entities looking to open EU bank accounts, secure trade finance, or access professional services, this translates to increased delays, higher compliance costs, and in some cases, rejections.
And it doesn’t stop there. EU Member States can go further. Under Article 18a(2)–(3), regulators can impose additional safeguards such as real time transaction reporting, sector-specific restrictions, and prohibitions on EU institutions establishing or maintaining correspondent banking relationships in Kenya. For Kenyan financial institutions, especially those serving as remittance corridors or processing cross-border payments, the risk of de-banking or de-risking is real. EU based partners may determine that the compliance burden outweighs the commercial benefit.
The broader economic impact could be serious. Remittances, which are an important source of foreign income for Kenya, may face delays. Trade finance could become more expensive as European banks reassess the risks of doing business with Kenyan companies. Investors might grow more cautious, especially at a time when Kenya is already facing economic pressures. There’s also the risk that other international partners may take similar steps, making it even harder for Kenyan institutions to operate smoothly across borders.
To reverse this trajectory, Kenya must move quickly and visibly. The FATF has already proposed an action plan addressing key weaknesses in areas such as beneficial ownership transparency, regulation of virtual asset service providers, and risk-based supervision of both financial and non-financial businesses like real estate and legal sectors. But ticking the boxes won’t be enough. The EU expects measurable enforcement outcomes: prosecutions, asset recoveries, cross-border cooperation, and institutional reforms that reflect not just compliance on paper, but deterrence in practice.
That requires serious inter-agency coordination, technical capacity, and political will. Kenya’s regulators, particularly the Financial Reporting Centre (FRC), Capital Markets Authority, and Central Bank, must continue to take a unified stance, enforcing compliance across sectors and not just within traditional banking. The legal framework, including laws on trusts, digital assets, and customer due diligence, must not only be enacted but operationalized. International partners, including EU delegations and FATF-style regional bodies like ESAAMLG, will expect ongoing engagement, transparency, and proof of follow through.
The stakes couldn’t be higher. Kenya is not the first country to be listed, and many have successfully exited. What matters now is Kenya’s ability to deliver real results. The longer Kenya stays on the list, the harder it becomes to unwind the market’s perception of elevated risk. In a global financial system increasingly intolerant of opacity, even a short-term label can leave long-term scars.
This is a chance for Kenya to reset the narrative. A strong, transparent financial system is not just important for compliance, it’s a foundation for growth, investment, and long-term credibility. The clock is ticking, and the world is watching. With the right action, recovery is entirely within reach.
