Central Bank of Kenya staff walk away with millions in old notes scandal

By MWANIKI MUNUHE

KENYA: Rogue employees of the Central Bank of Kenya are believed to have stolen hundreds of millions of shillings in currency notes earmarked for destruction.

This follows the discovery of major lapses in security procedures thought to be part of a well-planned conspiracy that has been at work for years. Sources say top officials at the supreme watchdog of financial transactions in the country, have no way of knowing how much was lost in the secret robberies.

CBK officials who spoke to The Standard on Saturday described a scam that seems right out of a Hollywood movie. Executed in secret, the racket appears to have involved individuals working in at least five different sections of the bank. Each part of the gang involved in the heist manages different stages of the crime, cooperating to ensure the untraceable loot leaves the bank safely.

Investigations by a foreign consultant unearthed the existence of the aged notes pipeline this year and have led to several staffers being demoted. No criminal charges have been brought against anyone, with our sources saying the bank was keen to avoid the bad publicity a prosecution would attract.

Controversial contract

The conspirators are suspected to have stolen millions at a time in ‘old and damaged notes’ earmarked for destruction. With the process repeated every few months and the money stolen being virtually untraceable, they are thought to have raked in hundreds of millions, possibly billions. Credible sources at the bank warn that the security failures that made the crimes possible have yet to be fixed and more money could easily be stolen.

When asked about the losses, Assistant Commissioner of Police George Kinoti, who is also the assistant director of security services at CBK countrywide, said the matter was “settled”.

“Investigations have been done as we speak and appropriate action was taken,” he said. “In fact, the bank is in the process of procuring an up-to-date system to ensure that the security of the bank is as tight as it can possibly get,” he added.

Pressed for details on what action had been taken against the suspects, Kinoti stuck to the general assertion: “Following the conclusion of the investigations, action was taken against those culpable in accordance with the law.” The matter is likely to arise in Parliament. Benjamin Lagat, the chairman of the House Finance Committee, said his team is aware of the goings-on at the bank.

“We are soon summoning the top management of the Central Bank,” said Lagat. “We are concerned about security at CBK... We expect when they appear… we shall get full information (on everything), including the controversial contracts.”

Security systems

Paper money has a lifespan of about five to 10 years before it is too dirty and damaged for use. Heavy handling can shorten this lifespan considerably, thus smaller denominations (Sh50 or Sh100) are destroyed more often than larger ones.

All notes earmarked for destruction are withdrawn from circulation by CBK’s Currency Operations and Administration departments, punched full of holes and sent to a machine that shreds the notes and turns them into blocks that can be burned in an incinerator (briquettes). The briquettes are then taken from the CBK headquarters to the Karura forest and burned.

Sources at the bank say the amount of paper money withdrawn from circulation varies from time to time, as does the interval between each briquetting operation. Some Currency Operations staffers have allegedly been taking advantage of security lapses to wheel bags of soiled but unpunched currency notes to the briquetting room along with punched notes.

Officers from the security, audit and currency departments, and the bank’s monitoring unit, are usually stationed in the briquetting room. Some among them are believed to collude with the currency staff to move the unpunched notes out of the bank. Sources say that CCTV surveillance cameras meant to record activities in the briquetting room are often not working or are “deliberately interfered with”, allowing the unpunched bundles to be removed from the bags and concealed in a litter collection point next to the briquetting room. The punched bundles are briquetted alongside waste paper and the machine fed with the amount indicated in the signed destruction certificate to generate a falsified protocol report that is used to balance the value. Other staff members involved in the crime carry the bundles of cash out like ordinary litter and share it out with those involved.

It is still not clear when the scam was first discovered. The Standard On Saturday has, however, seen a copy of an internal investigation report revealing the loopholes that enabled some of the cases reported.

International Security Consultancy, a company hired by CBK to assess its security systems noted that the current system easily exposes the bank to many security risks and recommended its replacement as a matter of urgency.

Currency thefts are not the only crime that has gone undetected at the bank. The Standard On Saturday is in possession yet more of documents showing how one branch of the bank lost three laptop computers in broad daylight, with the culprits walking out of the bank unnoticed.

CBK has its head office in Nairobi and branch offices in Mombasa, Kisumu and Eldoret. Given its importance to the economy, the bank is a highly protected area with visible and concealed security systems. The failure of these systems has raised concerns about millions being lost to crooks.

On May 17, at 4:34pm, a report from Central Bank Eldoret’s Security Unit was dispatched to head office indicating that three laptop computers had disappeared under mysterious circumstances. The three were a Compaq 610 (Serial Number CNU0064KW2) and two Dell Latitudes (Serial Numbers FP905Q1 and 6J905Q1) taken to Eldoret by staff from the head office.

Asked about the theft, the head of security in Eldoret James Magari said: “All these areas are covered by CCTV cameras. Most (of the) cameras are barely one year old. When they were installed, they were showing clear pictures but after some months, the cameras started failing, producing blurred and foggy images… making it difficult to identify anybody.”

Our investigations have revealed the cameras said to have been dysfunctional failed even before the report was made and have never been replaced to date. In fact, credible sources at CBK indicated to this reporter that some cameras in other branches, including the CBK headquarters, are not working effectively.

To this, a senior CBK officer responded: “If this is the situation, we are embarrassingly exposed. I advise that we take this matter internally before we involve the police division. In the event outside investigations commence, the obvious expectation is a visit to the control room for review of CCTV footage. We shall suffer a greater risk if our state is known.”

The bank is in the process of securing an integrated security system. The matter has raised a huge controversy pitting two departments of the same bank against each other. However, the Public Procurement Administrative Review Board has already ruled on the award of the contract.