NAIROBI, Kenya – Digital lenders in Kenya are increasingly becoming a soft target for criminal networks due to poor compliance with anti-money laundering and counter-terrorism financing rules, a new report by the Central Bank of Kenya (CBK) has revealed.
The Preventive Measures Survey—released as part of CBK’s heightened regulatory oversight following Kenya’s grey-listing by the Financial Action Task Force (FATF) in February 2024—shows that Digital Credit Providers (DCPs) lag significantly behind banks and microfinance institutions in enforcing financial sanctions and safeguarding against illicit financial activity.
“DCPs display mixed results. Around 78% of staff are at least somewhat familiar with TFS regulations, yet 22% have no familiarity at all, underscoring a pressing need for improved training and awareness,” the report states.
Major Gaps in Compliance
Only 35% of digital lenders conduct enhanced due diligence (EDD)—a key process when dealing with high-risk clients.
More worryingly, 8.5% of DCPs have no sanctions compliance measures at all, raising red flags about the integrity of their financial systems.
The survey also found that screening for global financial sanctions is irregular. While 71% of DCPs do some form of customer screening, just 23.8% conduct it on a daily or weekly basis, with most opting to screen “as needed.”
Additionally, only 47.5% regularly update their sanctions lists, and nearly half could not recommend any technological tools to support compliance, suggesting limited exposure to best practices.
Banks and MFIs Outperform Digital Lenders
In contrast, commercial banks and microfinance institutions (MFIs) showed stronger compliance, with most banks using automated screening tools and maintaining up-to-date sanctions lists.
All surveyed MFIs conduct sanctions screenings, and three-quarters use automated tools to ensure regulatory compliance.
The survey, which covered the year ending December 31, 2024, drew responses from 85 DCPs, 38 commercial banks, 14 MFIs, 84 forex bureaus, 27 money remittance providers, and 42 payment service providers.
Mismatch Between Satisfaction and Reality
Despite these glaring deficiencies, 88% of DCPs rated their compliance frameworks as satisfactory—a result CBK described as “encouraging but not conclusive,” given the substantial gaps highlighted.
Among the key challenges cited by DCPs were outdated sanctions lists (54%), limited resources, and inadequate staff training.
Respondents called for enhanced regulatory guidance (62%), adoption of automation tools (29%), and better awareness programs to boost compliance.
CBK Ramps Up Oversight Amid FATF Grey-Listing
The CBK said the survey is part of its broader push to enforce Targeted Financial Sanctions (TFS) obligations and strengthen the financial sector’s resilience to money laundering, terrorism financing, and other forms of financial crime.
The regulator has stepped up scrutiny of non-bank financial players following Kenya’s inclusion on FATF’s grey list, which has exposed the country to increased global compliance pressure.
The survey focused on six key areas: employee training, sanctions screening, current practices, challenges, feedback, and overall satisfaction.
The CBK said the responses, gathered primarily from Money Laundering Reporting Officers and senior compliance staff, offer vital insight into the sector’s preparedness to counter illicit financial activity.
