Chief executives and employees of banks who helped ship out billions of shillings from the National Youth Service (NYS) will be arrested and prosecuted, the Director of Public Prosecutions (DPP) Noordin Haji has said.
The announcement comes a day after the Central Bank of Kenya (CBK) fined five commercial banks a total of Sh392.5 million in connection with the theft of funds at the NYS.
“Those implicated will be prosecuted,” Mr Noordin told the Daily Nation in an interview on Thursday.
The law requires all financial institutions including banks, insurance companies and Saccos to file with the Financial Reporting Centre (FRC) daily reports on transactions above Sh1 million and those deemed suspect.
Bank executives and persons who are convicted for handling illicit cash face a Sh1 million fine and a three-year jail term, while institutions including banks, credit unions facilitating such deals could be fined up to Sh20 million upon conviction. Banks could also lose their licences.
CBK earlier Wednesday said the findings of its investigations had been passed onto investigators to assess whether they would bring any charges.
Those penalised are KCB Group (Sh149.5 million), Equity Bank (Sh89.5 million), Standard Chartered Bank-Kenya (ShSh77.5 million), Diamond Trust Bank (Sh56 million) and Co-operative Bank of Kenya (Sh20 million).
“The second phase of the investigations will involve use of these findings by other investigators, inter alia, assessment of criminal culpability by the Directorate of Criminal Investigations (DCI) and the Office of the Director of Public Prosecutions (ODPP),” CBK said in its statement. The CBK also said more banks would be investigated.
On Thursday, several commercial banks heads and boards were understood to have convened crisis meetings to assess their compliance levels with anti-money laundering guidelines as panic spread after the CBK announcement.
Kenya has 42 banks including those under liquidation and receivership. This came as more questions emerged on the criteria CBK used to penalise the five banks.
Spotlight also shifted on several other lenders which were used to make fraudulent payments in the first mega scandal at the youth agency.
President Uhuru Kenyatta had earlier ordered unprecedented tough new sanctions against individuals and institutions who flout anti-money laundering laws.
The penalties included loss of licence for banks found culpable. In his address to the nation from State House Nairobi in October 2015, where he outlined the measures to re-invigorate the war on corruption, President Kenyatta said:
“I have met with the Governor of the Central Bank of Kenya and with the Head of the Financial Reporting Centre to discuss and agree with them how we can ensure the banking system is not used to launder the proceeds of theft and fraud. From today those banks that break our anti-money laundering laws and regulations will, at a minimum, lose their banking licences.”
CBK REDEEMS ITSELF
The decision by CBK to penalise the lenders was on Thursday welcomed by experts who had long held that while there are laws and regulations which require banks to conduct checks to detect the proceeds of graft, many lenders are flouting them with no consequences.
“These were meaningful fines by the Central Bank,” said Nairobi based financial analyst Aly Khan Satchu.
Mr Kunal Ajmera, chief operating officer at consultancy firm Grant Thornton, said the sanctions would rein in rogue bankers.
“I think the action taken by CBK is unprecedented and shows the seriousness of the central bank to tackle graft in Kenya,” Mr Kunal in an interview said.
Mr Robert Shaw, also an analyst, said: “It shows the CBK is now playing a stronger and welcome role in regulating banks. For a long time it was perceived to have underperformed in this core responsibility area.”