Kenya’s plan to exit the Financial Action Task Force (FATF) grey list by 2027 is under threat after the Financial Reporting Centre (FRC) warned Parliament that severe budget cuts have left it without operational funds to fight money laundering and terrorism financing.
Lawmakers on the National Assembly’s Departmental Committee on Finance and National Planning have now pledged to support additional funding for the agency amid growing fears that prolonged grey-listing could hurt foreign investment, increase borrowing costs and damage Kenya’s reputation as a regional financial hub.
The warning emerged on Saturday during a meeting between the committee and the top management of the FRC, the state agency responsible for monitoring financial transactions and combating illicit financial flows.
The committee had convened the meeting to assess the Centre’s progress in implementing 12 strategic action points issued by the Financial Action Task Force following Kenya’s grey-listing in February 2024.
The reforms target weaknesses in Kenya’s Anti-Money Laundering, Counter Terrorist Financing and Counter Proliferation Financing frameworks.
As a result of the FATF designation, the European Commission also classified Kenya among high-risk third countries with anti-money laundering deficiencies, exposing the country to increased scrutiny from lenders such as the International Monetary Fund (IMF) and the World Bank.
FRC Director General Saitoti Rono, who took office two months ago, painted a grim financial picture for the 2026/2027 financial year, warning that budget ceilings imposed by the National Treasury had crippled the agency’s operational capacity.
According to Rono, the Centre had requested Sh2.49 billion to effectively monitor Kenya’s financial system but was allocated only Sh765.5 million, leaving a funding gap of Sh1.73 billion.
He said the agency had since reduced its request and now urgently requires at least Sh564.9 million to maintain minimum operations.
“Our operational funds remaining, stand at Zero,” Rono told lawmakers.
He explained that the current allocation would be entirely consumed by salaries and mandatory expenses such as rent, utilities, medical cover and insurance.
“We cannot exit the grey list without a well-funded Exit Plan,” he added, warning that the funding crisis directly compromises Kenya’s FATF Action Plan.
The FRC disclosed that it currently lacks resources to analyse more than 10,000 Suspicious Transaction Reports and Suspicious Activity Reports submitted annually by financial institutions and businesses.
Rono further noted that the agency was originally designed to regulate fewer than 100 institutions but now oversees more than 3,000 reporting entities, including lawyers, real estate agents and motor vehicle dealers.
He also warned that lack of funding had stalled critical cybersecurity upgrades, virtual asset tracing systems and dark-web monitoring capabilities.
The agency cautioned that continued grey-listing could lead to bottlenecks in correspondent banking, higher sovereign debt costs, delayed diaspora remittances and reduced foreign direct investment.
Finance Committee Chairperson Kuria Kimani acknowledged the seriousness of the matter and pledged to engage the National Treasury before the committee submits its recommendations to the Budget and Appropriations Committee.
“Hon. Members it is crucial that we support the Centre in its operations and in the quest to delist the country from the FATF listing,” Kimani said.
Lawmakers also reviewed draft regulations for Kenya’s Virtual Assets Service Providers Act, 2025, with the FRC identifying the lack of regulation in the virtual assets sector as one of the factors behind Kenya’s grey-listing.