Kenya’s key trade partners ‘deficient’ in regulating financial flows

Kenya’s key trading partners have been retained on a ‘grey list’ of countries with more work to do to tame money laundering and illicit financing of terrorist networks.

According to the Financial Action Task Force (FATF), a global money laundering and terrorist financing watchdog created by the G7, Pakistan, Uganda and South Sudan are among several countries listed as having risky regimes that allow unchecked flows of money.

The list of “jurisdictions under increased monitoring”, also known as the grey list, means that each of those countries has not fully implemented checks on financial transactions and must correct “swiftly the identified strategic deficiencies within agreed timeframes”.

The ‘grey list’ as of June this year includes Albania, Barbados, Botswana, Cambodia, Cayman Islands, Ghana, Jamaica, Mauritius, Morocco, Myanmar, Nicaragua, Pakistan, Panama, Uganda, and Zimbabwe. Others are Burkina Faso, Senegal, Haiti, Malta, Philippines and South Sudan.

And although the task force says listing does not usually mean enhanced due diligence measures, it generally advises countries or entities dealing with these countries to “take into account the information presented by the task force” in their risk analysis.

Pakistan, which buys most of Kenya’s tea and whose trade with Nairobi has averaged $85 million per year, was found to be lethargic in punishing money laundering agents. It was also found to have poor supervision of transactions and deterring transfers of money to terrorist sympathisers.

The task force said Pakistan must work with foreign counterparts to trace, freeze and confiscate assets and ensure compliance.

Uganda, Kenya’s seventh-largest trading partner at $82 million a year, was found to have made progress in taming illicit flows, but was advised to closely supervise financial institutions, improve tracing of transactions and punish perpetrators under local laws.

“Uganda is urged to apply the risk-based approach to supervision of NPOs (non-profit organisations] in line with the FATF Standards,” it recommended.

South Sudan, another of Kenya’s close trading partners, was advised to set up a competent and independent authority to monitor illicit flows, with sufficient resources to target suspects and deter illegal transactions.

The task force says these countries will remain on the list as long as they work on the commitments they had made earlier when they were reviewed on compliance.