Kenya is Grey Listed, Disruptive Innovations in Fintech

Here's what you need to know to start your week

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Kenyan Wall Street
February 26, 2024

The Weekly Brief, by The Kenyan Wall Street, is a newsletter that goes out to 20k+ subscribers every Monday morning at 9 am (EAT).

This is the last Monday of February, it turns out.

Once January is over things move fast: NSE has a new CEO starting in May, Kenya got grey listed, and the shilling seems to have settled in its exchange rate.

Kenya Grey Listed for Money Laundering

Last Friday, the Financial Action Task Force (FATF) listed Kenya as one of the countries that did not properly exercise its recommendations to stamp out money laundering and terrorist financing. 

  • Kenya and Namibia are now among 23 countries on the grey list, which means they are not compliant with the body's Anti-Money Laundering directives 

  • In the report, the Paris-based institution struck off UAE from the grey list and commended the Gulf nation for effectively controlling its financial streams. 

  • Cities like Dubai and Abu-dhabi have developed into global commercial hubs and luxurious tourist spots which have attracted money launderers, tax evaders, and sham enterprises.

Other countries that will no longer be subjected to heightened monitoring include Uganda, Barbados, and Gibraltar.

"The countries have demonstrated the necessary political will to sustain and continue these changes," said the FATF president Mr. Raja Kumar. 

Why it Matters

Countries in the grey list are not restricted. The anti-money laundering body simply alerts financial institutions like banks to take necessary precautions when dealing with individuals within that jurisdiction. 

“At this Plenary, the FATF added Kenya and Namibia to the list of jurisdictions subject to increased monitoring,” said the FATF in a statement. The development comes a decade after the FATF removed Kenya from its grey list, to which it had first been added in 2010.

  • Kenya's financial markets will be affected by stricter supervision until the government modifies its strategies for sealing illicit cash flows.

  • Such reputational damage could hinder the entry of foreign investors in red sectors like real estate and casinos. 

  • The government acknowledged the latest ranking in a statement from the Treasury but promised to ramp up legislative and enforcement efforts against money laundering to bolster investor confidence. 

"Kenya remains fully committed to implementing the FATF Action Plan comprehensively," said Treasury Cabinet Secretary Prof. Njuguna Ndung'u. "We will develop a comprehensive strategy to address remaining deficiencies."

Next Steps

The FAFT will also guide grey-listed nations to improve legislation on financial control, supervision of registered companies, and identification of suspicious elements and renowned criminals. Some countries like South Africa and Vietnam are still on the grey list but have reported improvements in their anti-money laundering efforts. 

On the flip side, blacklisted countries are havens for money laundering and terrorist financing because they remain uncooperative in the interglobal effort to control dirty cash.  

  • Failure to meet FATF's regulatory standards could exacerbate the risk of economic sanctions and financial seclusion for these countries. 

  • Iran refused to implement the Palermo and Terrorist Financing Conventions and the FATF categorized them as a High Risk Jurisdiction that other countries should be wary of. 

  • North Korea and Myanmar remain a concern for the FATF because their financial institutions and governments have refused to adhere to the AML/CFT guidelines since 2020. 

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NEWS SNAPSHOT

Frank Mwiti, the Eastern Africa Markets Lead & Partner at Ernst & Young, will succeed Geoffrey Odundo as the CEO of the Nairobi Securities Exchange (NSE).

Between the end of Odundo’s term and the start of Mwiti’s, NSE COO David Wainaina will be acting CEO.

Mwiti will take over the reins when the government and investors are keen to revive the bourse, which is still dominated by 5 top companies.

Among the things the new CEO will oversee is the public listing phase of the government’s privatisation plans, where state assets will either be sold to the public or to private investors.

Disruptive Innovations in Africa’s Digital Payments

Many businesses across Africa depend on bank partnerships and Fintech solutions to facilitate cross-border payments.

  • There are 42 different currencies in the continent derailing trade flow and limiting enterprise expansion.

  • When banks in some countries face a forex crunch, they introduce capital controls that impede imports by small-scale suppliers. 

  • The Fintech industry has rapidly transformed the monetary system by allowing customers to make payments wherever they are.

However many Fintech options are still localized payment solutions that do not transcend their regions of origin. For cross-border payments, a majority of businesses prefer banks for security and efficiency. 

There is a need for a Fintech solution that would integrate all forms of payment and accept transactions in every currency. This would help Small and Medium-sized enterprises (SMEs), International Trade Companies, and E-commerce businesses  attract customers from anywhere in Africa. 

Kora is one Pan African payment infrastructure that can help businesses in Africa grow beyond their borders. The  firm was founded in 2017 to help businesses accept payments from their customers and perform seamless transactions. It has grown immensely to benefit businesses in other ways. In the dawn of its expansion into Kenya and Ghana, the firm has set its sights on unveiling revolutionary solutions that would provide scalability to your business.

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