Illicit financial flows continue to take deeper root in Kenya and globally, with a new report revealing a sharp rise in the amount of money lost to this vice.

Data from the Partnership for African Social and Governance Research estimates that Kenya has been losing an average of Sh40 billion annually since 2011. However, the Auditor General warns that the figure may now be significantly higher.

Speaking during the launch of the Audit Report on Illicit Financial Flows in Africa—which covered 12 countries—Auditor General Nancy Gathungu noted that IFFs have expanded considerably, with Africa losing an estimated $88.6 billion (Sh11.5 trillion) annually. This figure represents 3.7 per cent of the continent’s gross domestic product (GDP).

“Knowing that we are evolving—not just in the public sector but also in economic growth and areas of focus—those looking to hide ill-gotten gains are also evolving. We don’t have precise figures, but it’s safe to say the losses are growing,” she said.

 Gathungu pointed to factors such as unregulated cryptocurrency, unmonitored mining activities, and loosely controlled construction projects as major drivers of illicit outflows. “Illicit financial flows may be growing due to weak oversight in extractive industries, and a lack of integrity in procurement processes in both the public and private sectors.”

According to her, the government is exploring the use of technology to better understand the cryptocurrency landscape and create a robust legal framework around it. “But we also need a solid regulatory and legal structure in the country. We need to define authority and establish clear criteria to guide our audits.”

A major hurdle in addressing IFFs, Gathungu noted, is the lack of coordination across institutions, both within and between countries. “Often, institutions operate in silos.  One agency might uncover critical information but fail to pass it on to another that could act on it. This disconnect makes the fight against IFFs a huge challenge.”

Kenya’s budget deficits

Gathungu emphasised the urgent need to strengthen legal frameworks at national and regional levels, underscoring that the amount lost annually could be used to plug Kenya’s budget deficits.

With the national debt now at Sh11.02 trillion, according to Treasury Cabinet Secretary John Mbadi, reducing IFFs could significantly lower reliance on both domestic and external borrowing.

“These loans—especially from foreign markets—are costly and have short maturity periods, adding pressure to our already tight fiscal space,” she said. “If we can reduce illicit flows, we might be able to finance our budgets without resorting to development partners or increasing public debt.”

Another major setback, she added, is the government’s failure to implement recommendations from oversight institutions. This has resulted in weak regulatory action against known sources of illicit flows, creating an environment where corruption thrives unchecked.

“As a country, we’ve made some strides, especially after being grey-listed in February 2024. But the weakest link remains the lack of sanctions—not just for institutions, but for the individuals directly involved in siphoning off resources.”

Gathungu noted that improved coordination would enable authorities to quantify the exact losses and respond with effective, collaborative measures. “With the right synergy between institutions, we can finally put a number to what we’re losing—and act on it.”

The gravity of the situation is further compounded by a controversial statement from Mbadi, who recently appeared before the Budget and Appropriations Committee. In his remarks, the CS suggested that Kenya should consider embracing illicit money if it cannot fight corruption effectively.

“If we cannot fight corruption and root it out, we better allow people who have got this illicit money to invest it here because you see, they are stealing this money and escaping with it to Dubai, and developing Tanzania, Dubai, and employing people there,” he said last month.