A new report from the US State Department now says lawyers, real estate agents and notaries are conduits of dirty money into the country even as Kenya battles listing as a “wash wash” paradise.
Kenya was in 2024 put under a watch list for failing to have strong safeguards against money laundering, a list of shame known as the “grey listing”.
In the 2025 International Narcotics Control Strategy Report, the US names non-financial business as facilitators of illicit flow of cash.
Apart from lawyers and estate agents, the report also list casinos (including internet casinos), dealers in precious metals and stones, NGO’s, accountants who are sole practitioners, partners or employees within professional firms, trusts and company service providers.
Others flagged are financial institutions and foreign nationals.
“The government [of Kenya] is enhancing its capability to regulate DNFBPs [Designated Non-financial Businesses and Professions] effectively; a court injunction has impeded the government from mandating lawyers to report suspicious transactions, though the government appears to have reached an accommodation with the plaintiffs,” the report says.
Kenya, a regional powerhouse, has been a conduit for gold smuggling and trafficking of drugs and wildlife.
While the US government notes that Kenya took “significant” legislative action in 2023 to update its Proceeds of Crime and Anti-Money Laundering Act, the court injunction became an impediment in the fight against money laundering.
The report is referring to a case at the High Court in January 2022 that temporarily stopped the implementation of sections of the amended anti-money laundering law, which compelled lawyers to report suspicious transactions involving their clients.
The proposed amendment sought to designate lawyers, notaries and other independent legal professionals as reporting entities to whom the anti-money laundering and combating of terrorism rules would apply.
Lawyer Omwanza Ombati had gone to the High Court arguing that the provisions were detrimental to their practice as lawyers, as they violated the principle of confidentiality between an advocate and client.
“The implementation of Section 2( c) and Section 14 (b) of the amended Act makes the advocates and their employees, who are not advocates, including accountants, clerks and cleaners, as reporting agents of the Financial reporting Centre (FRC). Offices of advocates have been made a junked police station,” Ombati argued.
He further said the amendment was making lawyers unwilling state agents, putting them at risk of penal consequences for failure to comply.
The law, however, finally took effect in March 2024, after a deal to withdraw the case.
Henceforth, advocates were expected to file financial transactions with the FRC, as well as Real Estate Agencies, Casinos, Dealers in Precious Metals and Stones, Accountants, Trust and Company Service Providers and Independent legal professionals.
Estate Agents Registration Board, Betting Control and Licensing Board, Ministry of Mining, Blue Economy and Maritime Affairs, Institute of Certified Public Accountants of Kenya Accountants, the Institute of Certified Secretaries of Kenya and LSK are the supervisory bodies.
The anti-money laundering reporting provision was a requirement for the Kenyan government top continue enjoying access to IMF loans.
The report also highlighted Kenyan financial institutions as likely conduits for money laundering, “associated with the trafficking of illegal narcotics, humans, weapons, wildlife, timber, charcoal, and minerals”.
“Trade-based money laundering remains a significant risk, with Kenya's proximity to Somalia attracting funds from unregulated Somali sectors like the khat and charcoal trades. Authorities acknowledge that goods reported at entry points as transiting Kenya are in many cases sold internally,” the report said.
The study noted that foreign nationals, “including refugees and ethnic Somali residents”, often frequently use informal remittance systems such as unlicensed money or value transfer services for international money transfers.
“Criminals may abuse these systems to provide them with a swift, anonymous transfer capability,” it said.
Kenya was in February grey-listed by the Financial Action Task Force, which meant it was under increased monitoring by FATF due to deficiencies in its anti-money laundering (AML) and counter-terrorism financing (CFT) regimes.
GOVERNMENT EFFORTS
The report, however, noted that the Kenyan government was working with a reputable implementer to reform its entire Anti-Money Laundering/ Combating the Financing of Terrorism (AML/CFT) regime.
“Kenya has land-based and online casinos, sports betting, and lotteries. The Betting Control and Licensing Board supervises gaming for AML/CFT purposes,” it noted.
Further, the report acknowledges that Kenya made a high-level political commitment in February 2024 to improve its systems through an action plan with the Financial Action Task Force. This was to address identified anti-money laundering/combating the financing of terrorism/counterproliferation financing (AML/CFT/CPF) deficiencies.
“Kenya committed to take a number of steps to expand and improve the capacity of covered entities; improve its collection of beneficial ownership information; adopt a legal framework for the licensing and supervision of virtual asset service providers; improve its risk-based AML/CFT supervisory programs; and improve or correct areas where CFT policy and program deficiencies were identified,” the report said.
In an update by then Treasury CS Prof Njuguna Ndung’u, Kenya said it had made several adjustments to comply. These included amendments to the laws, the designation of lawyers as reporting entities and enhancement of regulatory institutions such as the Central Bank of Kenya, Capital markets Authority and Insurance Regulatory Authority’s risk-based supervision.
It, however, recommended that the government needs to to strengthen implementation of good governance and anticorruption measures.
“Bureaucratic, logistical, and capacity challenges impede investigation and prosecution of financial crimes. Tracking and investigating suspicious transactions within the mobile money sector remain challenging,” the report says.
It also observed that the Ethics and Anti-Corruption Commission and the Assets Recovery Agency (ARA) have achieved some success, resulting in asset seizures and suspensions/impeachments of public officials.
However, better coordination among the agencies would enhance the overall effectiveness of combating corruption and money laundering in the country.
