Budget Cuts Weaken Kenya’s Fight Against Money Laundering
Kenya’s battle against dirty money faces big trouble. Budget cuts seriously hurt the main watchdog agency. This makes it harder to stop money laundering, terrorism financing, and illicit cash flows.
The FRC Struggles with Limited Resources
The Financial Reporting Centre (FRC) acts as Kenya’s key financial intelligence unit. It operates under the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA). The agency collects reports on big cash deals, over Sh1.94 million ($15,000), and cross-border transfers above Sh1.29 million ($10,000). It also tracks any suspicious activity, no matter the amount.
However, recent numbers show real strain. In the financial year ending June 2025, the FRC completed only 44 inspections of designated non-financial businesses and professions (DNFBPs). These include real estate agents, lawyers, accountants, casinos, and precious metals dealers. The target was 487 inspections. The FRC fell far short.
Registration performed even worse. The agency registered just 455 new reporting entities. Its goal stood at 990, less than half met.
Why the Shortfall? Shrinking Budgets
Budget cuts explain most of the problem. Treasury documents reveal steady declines. The FRC’s allocation dropped from Sh1.70 billion in 2022/23 to Sh1.29 billion in 2023/24. Then it fell sharply to around Sh570 million in 2024/25.
Actual spending followed the same trend. It went from Sh1.337 billion (2022/23) to Sh781 million (2023/24) and down to Sh670.3 million last year.
As a result, the FRC limits outreach, inspections, and new registrations. These cuts directly weaken compliance efforts.
Criminals Adapt Faster Than Regulators
The FRC warns that criminals evolve quickly. For example, suspects now hide behind shell companies. They obscure true ownership and fund sources this way. Others split large deals into smaller ones. This helps them dodge reporting thresholds.
Moreover, real estate remains a favorite hiding spot for corrupt money. Criminals, officials, and shady businesspeople often use legal entities or trusts to mask ownership. Many people and firms act as real estate agents without FRC registration. Therefore, loopholes stay wide open for illicit funds.
Mandatory Registration Covers Many Sectors
Registration is required for a broad range. It includes banks, digital credit providers, forex bureaus, lawyers, accountants, real estate professionals, casinos, and dealers in gems or metals. Without proper registration, suspicious transaction reports drop. Illicit money slips through undetected.
Kenya Faces Ongoing International Scrutiny
This weakness hurts at a critical time. Kenya stays on the FATF grey list in late 2025 and into 2026. The list flags jurisdictions with AML/CFT gaps. Despite progress, like the June 2025 Anti-Money Laundering Amendment Act, enforcement issues persist. Weak supervision of non-banks and DNFBPs draws continued attention.
The FATF and EU (which added Kenya to its high-risk list in mid-2025) watch closely. Grey-list status raises costs for international transactions. It can also damage investor confidence and banking ties.
What This Means for Kenyans and the Economy
Weak controls let corruption grow. They scare away clean foreign investment. Organized crime gains ground, too. With tight government budgets everywhere, people argue that the FRC needs protected funding. It must match the growing tricks of financial criminals.
Kenya aims to exit the grey list soon. Neighbors like South Africa, Nigeria, and others have succeeded after reforms. Closing resource gaps remains essential. Otherwise, the fight against dirty cash stays defensive. Criminals keep finding new ways forward.
The Treasury and leaders must act. They should reinvest in the FRC now. This prevents loopholes from growing wider.
