KRA downplays FATF claims of rampant illicit financial flows

The Kenya Revenue Authority (KRA) has dismissed the country’s inclusion on the Financial Action Task Force (FATF) grey list, terming it as unjustified, arguing that concerns over illicit financial flows and trade misinvoicing are overstated.

KRA Board Chairman Ndiritu Muriithi said these issues are not significantly affecting Kenya’s revenue mobilisation, despite data showing the exchequer loses billions to illicit transactions.

Kenya was added to the FATF grey list in February 2024, over weaknesses in its anti-money laundering (AML) and counter-terrorism financing (CTF) frameworks, including limited prosecutions for money laundering, poor oversight of the non-profit sector and cryptocurrency sectors, and inadequate investigations into terror financing.

 “I believe part of that is that those assessing us have not fully understood how it is that we are able to move three times the GDP,” he said.

Muriithi was speaking yesterday during the KRA Summit in Nairobi.

“They are evaluating us based on a very Eurocentric view of what the financial system should be.”

He urged the taskforce to consider Kenya’s unique reliance on mobile money, which underpins much of the country’s financial ecosystem.

“It is not justified. It’s like credit rating. Kenya deserves an investment-grade rating.  But the analysts coming from London and New York are still struggling on this,” Muriithi said.

Today, Kenya is at the cutting edge of moving money from mobile payment platform to credit cards and from credit card payment systems to mobile money.

This, technological advancement is to date, unique to Kenya alone, across the globe.

Even as the authority distances itself from the impact of illicit financial flows, data has shown that the exchequer losses billion in tax revenue due to irregular transactions and falsified invoices.

The Tax Justice Network estimates that Kenya loses $189.8 million (Sh25 billion) annually to tax abuse, with $134 million of this amount being lost due to tax abuse by multinational corporations, while $ 55.8 million is lost due to tax evasion by private individuals.

A 2024 Money Laundering and Terrorism Financing Trends and Typologies Report by the Financial Reporting Centre shows that between 2021 and 2023, the Centre received more than 14,000 reports, amounting to approximately Sh7.016 trillion.

Additionally, a report by Transparency International Kenya, dubbed Illicit Financial Flows in Kenya shows that the Global Financial Integrity estimates that illicit outflows from trade misinvoicing in Kenya was worth Sh95 billion in 2017.

Muriithi, said that to counter and reduce the incidences of illicit financial flows, there is need for regional cooperation so as to better track flows. The board’s chair said that the authority recorded reasonable growth in the first quarter of the financial year 2025/2026, despite missing its revenue targets.

“It is a reasonable growth, but we are certainly not where we would have liked to be.  What we have seen is very good performance in customs revenue, and slightly poorer performance on domestic tax,” Muriithi said.