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Kenya’s Insurance Sector Strengthens AML Compliance Amid FATF Scrutiny

Kenya’s Insurance Regulatory Authority (IRA) has taken significant steps to reinforce Anti-Money Laundering (AML) compliance across the life insurance sector. In a strategic workshop held at the College of Insurance in Nairobi, over 100 industry representatives received essential training on AML, Combating the Financing of Terrorism (CFT), and Countering Proliferation Financing (CPF) regulations.

As the country grapples with its placement on the Financial Action Task Force (FATF) “grey list,” enhancing customer verification processes and risk assessments within the insurance industry is a critical move to improve financial transparency and security.

Under Kenya’s Proceeds of Crime and Anti-Money Laundering Act (POCAMLA), life insurers and investment-linked insurance providers are designated as “reporting institutions.” This classification mandates that insurers, brokers, and agents implement stringent customer identification and verification measures to prevent financial crimes. The workshop emphasized Know Your Customer (KYC) procedures, including:

Customer Identification Procedures (CIP) – Ensuring all policyholders’ identities are accurately verified.
Customer Due Diligence (CDD) – Assessing client risk based on transactional behavior.
Enhanced Due Diligence (EDD) – Conducting deeper investigations on high-risk clients and entities.

With Kenya’s insurance penetration rate lagging at 2.39%, compared to the global average of 7.2%, bolstering public trust in the sector is imperative. Strengthened compliance frameworks and greater transparency are vital in fostering confidence among policyholders while enhancing industry resilience.

Impact of Financial Crime on Kenya’s Economy

Speaking at the workshop, Kalai Musee, Director of Supervision at IRA, underscored the economic threats posed by financial crimes. Representing the Commissioner of Insurance and IRA CEO, Mr. Godfrey Kiptum, Musee emphasized that robust KYC frameworks are crucial in identifying, preventing, and reporting illicit activities.

“Robust KYC processes are essential in detecting, preventing, and reporting suspicious transactions. This workshop has provided life insurers with the necessary guidance to uphold financial integrity and regulatory compliance,” Musee stated.

Financial crimes, including money laundering and terrorism financing, erode public confidence and weaken the financial sector’s stability. Given Kenya’s ongoing efforts to be removed from the FATF grey list, stakeholders in the insurance sector must actively participate in strengthening preventive measures. Key focus areas include:

Beneficial Ownership Identification – Ensuring transparency in ownership structures to curb illicit financial activities.
Enhanced Due Diligence for High-Risk Clients – Implementing stricter screening for politically exposed persons (PEPs) and entities linked to suspicious transactions.
Regulatory Compliance Enhancement – Aligning internal policies with evolving global AML/CFT standards.

IRA’s Strategic Compliance Roadmap

To support life insurers in refining their AML/CFT programs, IRA is developing Guidance Notes that will streamline compliance efforts. These directives will assist industry stakeholders in:

Implementing Customer Identification Policies that detect and deter financial crime.
Strengthening AML/CFT reporting mechanisms.
Enhancing risk-based approaches for client onboarding and transaction monitoring.

Furthermore, testimonials from Money Laundering Reporting Officers (MLROs) at leading insurers, including Jubilee Life and Absa Life, provided practical insights into effective KYC implementation. These industry players shared best practices in integrating AML safeguards within their operations, offering real-world applications of compliance strategies.

Conclusion: The Path Forward for Kenya’s Insurance Sector

The Nairobi workshop aligns with resolutions from the 15th Joint Financial Sector Regulators Forum held in Mombasa in November 2024. Regulators across Kenya’s financial ecosystem—including the Central Bank of Kenya (CBK), Retirement Benefits Authority (RBA), Capital Markets Authority (CMA), and Sacco Societies Regulatory Authority (SASRA)—are committed to reinforcing supervisory frameworks to mitigate financial crime risks.

For Kenya’s insurance sector, the path forward hinges on rapid adoption of enhanced AML measures. As global scrutiny intensifies, proactive compliance initiatives will play a pivotal role in strengthening the industry’s integrity, fostering investor confidence, and securing Kenya’s removal from the FATF grey list.