Cracking Down on Financial Crime: How AI is Helping East African Banks Navigate a Digital Crossroads

The East African Community (EAC) has prioritized greater financial integration across its member states, which has led to a surge in cross-border payments.

By Green Last updated Jul 14, 2025

As East Africa’s financial ecosystem undergoes rapid transformation, banks across the region are facing a new and evolving challenge: safeguarding their systems against financial crime while maintaining customer trust in an increasingly digital landscape.

With cross-border transactions rising, mobile payments booming, and fintech innovation reshaping customer expectations, traditional compliance systems are struggling to keep pace.

Kenya, often hailed as a continental leader in mobile banking and digital financial inclusion, has seen an explosion in digital transactions in recent years.

According to the Central Bank of Kenya (CBK), the value of mobile money transfers reached KSh 7.95 trillion in 2023. While this marked only a modest increase from 2022, it came amid challenging macroeconomic conditions and a hike in excise duty on transfers.

Mobile money adoption continues to rise, with over 84.6 million mobile money subscriptions recorded across the country by early 2025, outpacing the national population and reflecting near-saturation levels of access. But with this rapid growth comes increasing risk.

The region is becoming a target for sophisticated fraud, money laundering, and terrorism financing schemes that can slip through the cracks of conventional anti-money laundering (AML) systems. According to global watchdogs and local compliance experts, East African banks remain vulnerable due to fragmented data, siloed systems, and limited visibility across complex, multi-country networks.

This challenge is particularly acute for banking groups operating across borders, like Kenya’s I&M Group PLC, a regional financial powerhouse with operations in Uganda, Tanzania, Rwanda, and Mauritius. For such institutions, the stakes are high. Regulatory requirements vary by country, but the expectation is the same: detect and report suspicious activity without slowing down customer onboarding or legitimate payments.

“Financial crime doesn’t stop at borders. But legacy systems often do,” says one Nairobi-based compliance officer at a tier-one bank. “To protect customers and reputations, we need tools that can see the whole picture, not just fragments.”

Enter AI: A New Kind of Watchdog

To meet this growing threat, I&M Group PLC has announced a partnership with ThetaRay, an Israel- and US-based AI firm that provides advanced transaction monitoring and AML tools to some of the world’s top banks and fintechs.

The company’s solution, already deployed at institutions such as Santander, Mashreq Bank, Onafriq, and ClearBank, uses “unsupervised” machine learning to detect anomalies and suspicious patterns without relying solely on pre-programmed rules.

By implementing ThetaRay’s platform across its five operating markets, I&M aims to unify its compliance infrastructure, improving its ability to detect money laundering and other financial crimes across jurisdictions while streamlining operations.

“In today’s financial environment, you need technology that can adapt in real time,” said I&M Group CEO Gul Khan. “This AI platform gives us a scalable, intelligent solution to monitor billions of data points and identify risk proactively, without compromising the customer experience.”

The move comes at a critical time for East African banking. The East African Community (EAC) has prioritized greater financial integration across its member states, which has led to a surge in cross-border payments.

According to the AfricaNenda State of Instant Payments Report 2023, instant payment systems across the continent processed over 1.2 billion transactions in 2022, and that number continues to grow.

But integration has outpaced harmonization. Each country still operates its own set of regulatory rules and oversight structures, making regional compliance a puzzle. Meanwhile, fraudsters are using this regulatory patchwork to move illicit funds across borders with increasing sophistication.

This is where AI-based platforms like ThetaRay’s offer an advantage. Rather than depending on static rules, such as flagging all transactions over a certain threshold, their machine learning models assess behavior dynamically, flagging unusual patterns across multiple variables including frequency, geography, counterparties, and transaction history.

ThetaRay’s platform also supports real-time alerts and decision-making, which is essential in a market like Kenya, where digital payment volumes are vast and fast.

The Trust Factor

But the adoption of AI is not just about regulatory compliance, it is also about maintaining trust. In recent years, East African consumers have become more financially literate and digitally savvy. They expect secure, seamless services, and are quick to lose confidence in institutions that fall short.

Kenya’s Data Protection Act of 2019 and the growing influence of the Office of the Data Protection Commissioner have raised the bar for responsible data handling, making it vital that AI systems are explainable, auditable, and accountable.

“We’re not just talking about stopping money laundering,” said ThetaRay CEO Peter Reynolds. “We’re talking about enabling financial institutions to operate with integrity, detect emerging threats, and support financial inclusion without compromise.”

Ultimately, East Africa’s financial sector sits at a crossroads. On one hand, it is a global leader in mobile banking innovation, thanks to platforms like M-PESA, which handled billions of transactions in 2023. On the other, it faces increasing threats from cybercrime, fraud networks, and illicit financial flows.

While exact cyber-fraud loss figures remain unverified for 2023, CBK officials and commercial bank compliance teams agree the trend is concerning. And as banks race to digitize their services, the attack surface is only expanding.

For regional leaders like I&M Group, the answer lies in embracing intelligent systems that go beyond tick-box compliance. AI-powered AML platforms promise to reduce false positives, cut investigation times, and improve accuracy, all while scaling across borders.

Still, success depends not just on the technology but on how it is used. Training, integration, and regulatory cooperation are essential to ensure that innovation leads to real impact.

As East Africa continues its digital leap, banks that harness AI responsibly may not only protect themselves, but help set a new global standard for smart, secure, and inclusive banking.