Top bank bosses face ar­rest, fines

The East African - - NEWS -

By AL­LAN OLINGO

SE­NIOR BANK ex­ec­u­tives are fac­ing ar­rest and ar­raign­ment in court for their al­leged role in help­ing ship out more than $30 mil­lion of money stolen from Kenya's Na­tional Youth Ser­vice (NYS) two years ago.

On Thurs­day, the Di­rec­tor of Pub­lic Pros­e­cu­tions No­ordin Haji said that he will be pre­par­ing charges against the ex­ec­u­tives, just a day af­ter the coun­try's reg­u­la­tor fined five banks $3.1 mil­lion for their role in aid­ing the move­ment of the stolen funds.

The pe­nalised banks are KCB Group, the re­gion's largest bank by as­sets which was slapped with a $1.49 mil­lion fine, Eq­uity Bank $895,000, Stan­dard Char­tered Bank-kenya $775,000, Di­a­mond Trust Bank $560,000 and Co-op­er­a­tive Bank of Kenya $200,000.

“The sec­ond phase of in­ves­ti­ga­tions will use th­ese find­ings by other in­ves­ti­ga­tors, in­ter alia, and as­sess the crim­i­nal cul­pa­bil­ity through the Direc­torate of Crim­i­nal In­ves­ti­ga­tions and the Of­fice of the Di­rec­tor of Pub­lic Pros­e­cu­tions,” CBK said in its state­ment, adding that more banks would be in­ves­ti­gated.

An in­di­vid­ual found guilty of con­tra­ven­ing the Crime and Anti-money Laun­der­ing Act faces a prison term not ex­ceed­ing 14 years or a fine of Ksh5 mil­lion ($50,000).

This is the sec­ond fi­nan­cial fraud in five years in­volv­ing the NYS, which has since lost more than $46 mil­lion in fraud­u­lent deals.

The law re­quires all fi­nan­cial in­sti­tu­tions to file daily re­ports with the Fi­nan­cial Re­port­ing Cen­tre on trans­ac­tions above $10,000 and those deemed sus­pect. The reg­u­la­tor has ac­cused the five banks of fail­ing to com­ply with the re­quire­ments of Kenya's Anti-money Laun­der­ing/com­bat­ing Fi­nanc­ing of Ter­ror­ism laws and reg­u­la­tions.

“From our in­ves­ti­ga­tions, the vi­o­la­tions were iden­ti­fied, prin­ci­pally re­lated to fail­ure to re­port large cash trans­ac­tions, fail­ure to un­der­take ad­e­quate cus­tomer due dili­gence, lack of sup­port­ing doc­u­men­ta­tion for large trans­ac­tions and lapses in the re­port­ing of Sus­pi­cious Trans­ac­tion Re­ports to the Fi­nan­cial Re­port­ing Cen­tre,” CBK said.

Sev­eral com­mer­cial bankheads and boards are un­der­stood to have con­vened cri­sis meet­ings to as­sess their com­pli­ance lev­els fol­low­ing CBK'S an­nounce­ment and DPP'S con­firm­ing of the im­pend­ing ar­rests.

The ex­ec­u­tives were sum­moned by the reg­u­la­tor on Septem­ber 10, where the Cen­tral Bank made it clear they would bear re­spon­si­bil­ity for non-com­pli­ance with the fi­nan­cial re­port­ing and anti-money laun­der­ing laws.

“They were told in no un­cer­tain terms that this time round they will be on their own and would face the courts. They have been get­ting away with many of such trans­ac­tions in­clud­ing the first NYS scan­dal, but this one will be dif­fer­ent. This will be the big­gest sig­nal that it is not busi­ness as usual in the bank­ing sec­tor,” a source told

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