Kenya has recently been under increased spotlight, particularly on the money laundering and terrorism financing (ML/TF) front. The Financial Action Task Force (FATF) recently put Kenya on the heightened watch list, often referred to as the “grey list,” citing deficiencies in its anti-money laundering and counter-terrorism financing (AML/CTF) architecture.

Despite the government’s bullish response reiterating its commitment to the Action Plan proposed by the global financial watchdog, more needs to be done. Perhaps the clearest indicator was the recent sanctions issued against companies domiciled in Kenya for alleged involvement in an ML/TF axis, benefitting the Al-Shabaab terrorist group.

Closer home, the probe into the Telkom sale saga hit a dead end owing to a lack of framework governing Kenya’s cross-border financial intelligence infrastructure. While the money, totalling approximately Kshs. 6 billion, moved across borders, Kenyan authorities were unable to track its movement for the aforementioned reasons.

Suffice it to say that Kenya’s ascension into the Egmont Group, effective 1st February 2024, is a timely move, more so as the country grapples to undo the negative ramifications of the heightened spotlight by the FATF. That being said, what does this membership mean? And what are the possible ramifications on businesses operating in the country?

From the very onset, there has been an appreciation that data on financial transactions is key and valuable in the context of security threats whilst also being particularly privacy-sensitive. To effectively balance these two variables, financial intelligence units sought to navigate the politics of information sharing by creating a unified platform to ensure seamless, lawful, and mutually beneficial sharing of information relating to ML/TF- the Egmont Group.

Established in 1995, the Egmont Group is an informal international body of Financial Intelligence Units (FIUs) whose explicit goal is to promote and enhance international cooperation in the investigation and prosecution of money laundering and financing of terrorism. The group was founded at the Egmont Arenberg Palace in Brussels, Belgium, hence the name.

The Group is a united body of 174 Financial Intelligence Units (FIUs). FIUs are strategically positioned in the war against ML/TF. They are the trusted gateways for sharing financial information domestically and internationally per global anti-money laundering and counter-financing of terrorism (AML/CFT) standards. Via the Egmont Group, FIUs have a platform to securely exchange expertise and financial intelligence to combat money laundering, terrorist financing (ML/TF), and associated predicate offences.

Fundamentally, the Egmont Group exemplifies the following:

• Value Addition: The Group plays a value-addition role by helping stakeholders improve their appreciation and understanding of ML/TF risks. It relies on its massive operational experience to inform policy considerations, including AML/CFT implementation and reforms. Suffice it to say that the Egmont Group is the operational arm of the international AML/CFT apparatus.

• Financial Intelligence Sharing and International Cooperation: Financial intelligence sharing is at the core of the Group’s operational framework. This is of paramount importance and has become the cornerstone of international efforts to counter ML/TF. While FIUs around the world are obliged by international AML/CFT standards to exchange information and engage in international cooperation, the Group comes in handy to create a global financial intelligence forum where prompt and secure sharing and exchange of information between members occurs.

• International Standards Implementation: The Group also supports international partners’ and other stakeholders’ efforts to implement the resolutions and statements of the United Nations Security Council, Financial Action Task Force (FATF), and G20 Finance Ministers.

The procedure and process of joining the Egmont Group is a thorough one. The governing body of the Group must be adequately satisfied that the applicant is able to operate independently and will remain autonomous, devoid of political influence.

With Kenya joining the Group, the noose on suspicious financial activities is bound to be tightened further. The regulatory authorities will definitely cascade down the increased spotlight on the country to businesses. Consequently, businesses will be under more scrutiny, and the FRC will be keen to pick every singular detail of a suspicious transaction.

For businesses, the information derived from them is now going to be securely shared by the Financial Reporting Centre (FRC), Kenya’s financial intelligence unit, among its peers through the Group upon request. This creates the need for businesses to entrench risk and compliance measures by design into their operations. More importantly, businesses now need to recalibrate their Know Your Customer (KYC) strategies to ensure they are not caught flat-footed.