(NAIROBI, KENYA) – Banks and other financial institutions in Kenya now face fines of up to KES 20 million ($155,000/GBP 122,000) for breaking new terror financing rules as the country works to stop suspicious financial flows.
New regulations from the Ministry of Interior and National Administration raise the maximum penalty for financial institutions more than six times from KES 3 million ($23,250/GBP 18,300). The jail term for offending officials has also been increased to 10 years from seven years.
The regulations were published on 7th September 2026. They replace rules that had been in use since 2023 and place more detailed requirements on institutions that handle accounts and assets linked to people or entities under terrorist sanctions.
The rules cut fines for individuals to a maximum of KES 1 million ($7,750/GBP 6,100) from KES 3 million. The longer 10 year jail term balances this change.
“A person who contravenes the provisions of these regulations, where a specific penalty is not provided for, shall be liable on conviction, to imprisonment for a term not exceeding 10 years, in the case of a natural person,” the revised regulations state.
“In the case of a legal person, to a fine not exceeding KES 20 million ($155,000/GBP 122,000) or in the case of a natural person, to a fine not exceeding KES 1 million ($7,750/GBP 6,100).”
The changes come as Kenya seeks to address weaknesses identified by the global financial watchdog, the Financial Action Task Force (FATF). The FATF placed Kenya under increased monitoring, commonly known as the grey list, in February 2024.
Kenya remains on the FATF list and was among countries whose progress was reviewed in June 2026. The watchdog asked Kenya to improve its risk based supervision of financial institutions and designated non financial businesses and strengthen preventive measures and suspicious transaction reporting.
Under the new anti terrorism rules, banks must report action taken against sanctioned accounts to the Counter Financing of Terrorism Inter Ministerial Committee within 24 hours. The rules state that the report must disclose the account number, account holder, exact time of freezing, balance at the time of freezing and details of related accounts, including the reason those accounts were identified as related.
Institutions must also now report attempted transactions after an asset freeze, including the account involved, time of the attempted transaction, account balance and details of the person attempting the transaction.
The rules further require reporting institutions to regularly review the domestic and United Nations sanctions lists and continuously monitor transactions involving listed people or entities.
The requirement to freeze terrorist linked funds without prior notice has been retained, but the timelines have been tightened. The 2026 rules require holders of targeted funds to freeze assets owned or controlled directly or indirectly by a person on the sanctions list.
For banks, this means sanctions screening will need to move beyond the main account holder to connected accounts and attempted dealings, increasing the importance of real time screening.
The regulations require banks to freeze the assets without delay once an individual or company has been put on the United Nations Security Council (UNSC) or domestic committee sanctions list. While the 2023 regulations defined without delay as action taken within 24 hours of a person or entity being put on the sanctions list, the 2026 rules require action within a matter of hours of the designation while retaining the 24 hour deadline.
The Financial Reporting Centre (FRC) told the Business Daily that the new definition of without delay has tightened the timeline for implementing terrorist sanctions, requiring authorities and reporting institutions to act within hours rather than waiting for the end of the 24 hour window.
“This now requires immediacy of implementation to ensure that the freezing takes place almost immediately, within a matter of hours,” said the FRC.
“Authorities and reporting institutions must now take action immediately upon publication of the designation by the UNSC. Ultimately, the regulations clarify that the 24 hour countdown begins when the UNSC lists.”
The regulations further broaden the compliance net by defining a reporting institution to include financial institutions, designated non financial businesses and professions, and virtual asset service providers.
Another key change is the formal treatment of people who may be unfairly caught by sanctions. The 2026 regulations introduce provisions on false positives, providing safeguards for people whose assets are wrongly frozen. People who feel they have been unfairly included in a terrorism linked list will now apply to the committee for a repeal.
The committee is required to determine such applications and communicate the decision to holders of the frozen assets.
The tougher rules signal Kenya’s push to close gaps in its anti money laundering and counter terrorist financing regime as the country pushes to exit the grey list.
Kenya was added to the FATF grey list in February 2024 and remained under increased monitoring in the watchdog’s June 2026 review. FATF describes the grey list as covering jurisdictions working to address strategic deficiencies within agreed timeframes.
FATF said in a June assessment that Kenya has taken steps towards improving its Anti Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime, including by increasing financial institutions’ and designated non financial businesses and professions’ understanding of targeted financial sanctions.
The watchdog added that Kenya needs to continue implementing its FATF action plan to address its strategic deficiencies through measures such as improving risk based supervision and use of financial intelligence.
FATF also asked Kenya to strengthen investigations and prosecutions and address gaps in the regulation of trusts and beneficial ownership information. Kenya has since implemented a new law that compels trusts to disclose beneficial owners.