NAIROBI, KENYA: Central bank has upheld fines it slapped on five commercial lenders in September over suspicious transactions linked to NYS scam.
CBK evaluated the monetary penalties for Standard Chartered Bank Kenya, Equity Bank Kenya, KCB Kenya, Co-operative Bank of Kenya and Diamond Trust Bank Kenya in regards to the extent of violation that were identified pursuant to CBK’s powers under the Banking Act and the Central Bank of Kenya Act.
The bank regulator had called for a response from commercial banks to the penalty assessment in an investigation on suspected commercial banks that were unlawfully transacting with the National Youth Service (NYS).
“The submitted action plans will strengthen the banks’ anti-money laundering and counting of financing of terrorism (AML/CFT) frameworks. The actions taken are aimed at safeguarding stakeholders’ interests and maintaining a healthy financial sector,” read a statement from CBK.
CBK has concluded that the submissions were not sufficient to alter the outcome of the investigations and made the penalties as evaluated.
The banking regulator fined the five banks Sh392.5 million for allegedly allowing NYS suspect to siphon Sh9 billion from State coffers
KCB has been slapped with the highest penalty for channelling money stolen from the Government through the NYS scam. It will be required to pay Sh149.5 million for processing amounts of up to Sh639 million. This is despite the fact that the bank processed lower amounts than its peers.
Standard Chartered processed Sh1.62 billion but was fined Sh77.5 million, while Equity Bank processed Sh886 million and was fined Sh89.5 million.
Co-operative Bank was also found culpable for helping divert Sh263 million and will have to pay Sh20 million. Diamond Trust Bank will pay Sh56 million for transferring Sh162.5 million to NYS suspects’ accounts.
The fines were based on the lenders’ failure to report large transactions that would have raised a red flag to relevant investigating authorities. The banks also seemed to have done little or no due diligence on the customers they handed cash to and sometimes handed over large sums of money without appropriate documentation.
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It was reported that some of the companies under investigation opened accounts a few hours before the NYS money was credited, which meant that insiders were aiding the suspects in the fraud.