As East Africa’s financial sector undergoes swift transformation, banks across the region are grappling with a new challenge: safeguarding their systems against rising financial crimes while maintaining customer trust in an increasingly digital world.
The surge in cross-border transactions, booming mobile payments, and fintech innovations has pushed traditional compliance systems to their limits.
Kenya, often recognized as a pioneer in mobile banking and digital financial inclusion, has experienced a dramatic increase in digital transactions in recent years.
Data from the Central Bank of Kenya (CBK) shows that mobile money transfer values reached KSh 7.95 trillion in 2023—a modest growth over the previous year, despite challenging economic conditions and increased taxes on transfers.
Mobile money adoption continues to soar, with over 84.6 million subscriptions recorded by early 2025—outnumbering the country’s population and indicating near-saturation.
However, this rapid expansion has amplified the risks, as the region becomes an attractive target for sophisticated fraud, money laundering, and terrorism financing schemes that often slip through conventional anti-money laundering (AML) defenses.
Regional banks, especially those operating across multiple countries, face additional hurdles. Variations in regulatory requirements across borders demand a delicate balance: detecting suspicious activity promptly without slowing down legitimate transactions or onboarding processes.
Experts warn that legacy systems are inadequate for this task. “Financial crime doesn’t stop at borders. But legacy systems often do,” notes a compliance officer from a major Nairobi-based bank. “To protect our customers and reputation, we need comprehensive tools that can see the full picture.”
AI Steps into the Fray
In response to these challenges, some banks are turning to cutting-edge artificial intelligence solutions. I&M Group PLC, a prominent East African banking group with operations in Uganda, Tanzania, Rwanda, and Mauritius, has partnered with ThetaRay, an Israel- and US-based AI firm specializing in transaction monitoring and AML tools. Their platform, already adopted by global banks like Santander and Mashreq Bank, employs “unsupervised” machine learning to detect anomalies and suspicious patterns without relying solely on pre-set rules.
By integrating ThetaRay’s AI across its regional operations, I&M aims to unify its compliance efforts, improve the detection of money laundering activities, and streamline operations across borders.
Gul Khan, CEO of I&M Group, emphasizes the importance of adaptable technology: “In today’s financial environment, you need systems that can evolve in real-time. This AI platform allows us to monitor billions of data points proactively, without compromising the customer experience.”
A Critical Need for Regional Cooperation
This technological shift comes at a pivotal moment. The East African Community (EAC) has prioritized greater financial integration, leading to an uptick in cross-border payments. According to the AfricaNenda State of Instant Payments Report 2023, over 1.2 billion transactions were processed through instant payment systems in 2022, a figure expected to grow further.
Yet, integration has outpaced harmonization. Divergent regulatory frameworks across East African nations complicate compliance efforts, creating opportunities for fraudsters to exploit jurisdictional gaps. AI-driven platforms like ThetaRay’s are uniquely equipped to address this issue, offering dynamic, behavior-based monitoring that assesses variables such as transaction frequency, geography, and counterparties—rather than relying on static thresholds.
Real-time alerts enable quick decision-making, vital in a market characterized by vast and fast-paced digital payment activity.
Balancing Security with Trust
Beyond compliance, AI adoption is integral to maintaining consumer trust. East African customers are increasingly digitally savvy and expect secure, seamless banking experiences. Any lapses or breaches risk eroding confidence in financial institutions. Furthermore, compliance with Kenya’s Data Protection Act of 2019 and reports from the Data Protection Commissioner demand transparency, accountability, and explainability from AI systems.
Peter Reynolds, CEO of ThetaRay, highlights this point: “Our goal isn’t just stopping money laundering. It’s about empowering financial institutions to operate with integrity, detect emerging threats, and foster financial inclusion without compromising security.”
The Road Ahead
East Africa’s financial landscape stands at a crossroads. The region is a global leader in mobile banking innovation—M-PESA alone handled billions of transactions in 2023—yet cyber threats and illicit financial flows pose serious risks.
While exact losses from cybercrime remain unverified, industry stakeholders agree that the trend is worrisome, especially as digital services expand.
For banks like I&M Group, embracing intelligent, AI-powered AML tools represents a strategic move toward more secure, efficient, and inclusive banking. These systems promise to reduce false positives, shorten investigation times, and extend compliance across borders. However, success hinges on proper implementation—through staff training, integration, and strong regulatory cooperation.
As East Africa accelerates its digital leap, banks that leverage AI responsibly could not only protect themselves but also set a new global standard for smart, secure, and inclusive financial services.
