Study to Establish the Size of Kenya's Illicit Financial Flows (IFFs)

Illicit Financial Flows (IFFs) pose a major obstacle to Africa’s economic development by draining essential resources needed for development. According to various reports including by UN Trade and Development (UNCTAD) and the African Union/ UN Economic Commission for Africa (AU/ UNECA) High-Level Panel Report on Illicit Financial Flows from Africa (Mbeki Panel Report), IFFs have significantly weakened domestic resource mobilisation (DRM), financial stability, and economic performance across African countries. Africa is estimated to lose up to US $88.6 billion annually through IFFs, exceeding the total foreign direct investment (FDI) and official development assistance (ODA) it receives. These outflows stem from transnational commercial activities, criminal enterprises, and corruption. The Addis Ababa Action Agenda (2015) and the Mbeki Panel Report both recommend stronger national regulations, international cooperation, and institutional reforms to combat IFFs. However, implementation has been weak, and reliable data on the actual scale of IFFs remains insufficient.

This study seeks to assess the legal, policy and institutional frameworks related to addressing IFFs and to estimate the amounts lost through commercial, criminal and corruption means. It finds that Kenya’s legal, policy and institutional frameworks are continuously improving with particular advancements in the use of exchange of information requests, in the regular assessments of vulnerabilities related to money laundering, and with the public reporting of corruption related cases, among others. Corporate as well as financial secrecy and perceptions of corruption, however, remain wanting. Some identified challenges include challenges in beneficial ownership of importers and trading corporates, regulations on seizure and overlapping roles between some agencies handling IFF matters.