The bosses of top banks could be dragged to court in connection with the Sh1 billion detectives say was looted through five financial institutions involved in processing National Youth Service (NYS) payments.
After investigations into the NYS II scandal, which prosecutors say involved over Sh8 billion, the Director of Criminal Investigations has flagged suspect transactions in the five banks totalling over Sh1 billion and forwarded the files to the Director of Public Prosecutions (DPP).
DCI George Kinoti yesterday told The Standard he had recommended that criminal charges be levelled against the chief executives of the five major banks, an unprecedented move should DPP Noordin Haji, after perusal of the files, recommend their prosecution.
Mr Haji yesterday said the DCI had recommended that charges be preferred against the banks, bank officials, individuals and entities “for concealing and facilitating, aiding, abetting and benefiting from proceeds of crime” and went ahead to name the banks and the improprieties investigations found.
Haji, in a statement yesterday, said he had constituted a team of senior prosecutors to independently review the respective files and make recommendations within 14 days.
The banks in trouble are Standard Chartered Bank, Kenya Commercial Bank, Equity Bank, Diamond Trust Bank and Cooperative Bank.
Should the DPP approve the recommendations for prosecution, top bankers, including former Standard Chartered boss Lamin Manjang, Kenya Commercial Bank CEO Joshua Oigara, Equity Bank CEO James Mwangi, Diamond Trust Bank CEO Nasim Devji, and Cooperative Bank’s Gideon Muriuki could be dragged to court.
Investigators want any administrator who breached corporate rules and regulations, signed any document or was part of any resolution that aided NYS suspects siphon the money arraigned.
The DPP said that after investigations by the Central Bank of Kenya and the Directorate of Criminal Investigations, suspicious transactions had been identified.
Banks, under crime and money laundering laws, have a duty to report large transactions and, in this case, the DCI said they contravened their mandate by not reporting transactions that exceeded Sh1 million to the Financial Reporting Centre.
Stanchart processed a total of Sh1.6 billion between January 2016 and April 2018 out of which Sh588 million was suspiciously transacted by bank officials without raising the alarm on their dubious nature, according to investigators.
KCB received Sh800 million and is in trouble over questionable transactions of Sh148.3 million. Equity Bank got Sh886 million but looked the other way over some transactions in Kenyan shillings and dollars.
“It was established that an amount of Sh264 million and $58,000 (Sh5.8 million) was suspiciously transacted by officials of the bank (Equity) in violation of the law,” Haji said.
DTB received Sh164 million, out of which Sh27.9 million was suspect while Cooperative Bank got Sh250 million out of which Sh25 million raised eyebrows.
Last year, the Central Bank of Kenya fined the five banks – KCB, Equity, Stanchart, Cooperative and DTB – Sh392.5 million for facilitating one of the country’s biggest frauds.
CBK had stated that 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. 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.
In its defence, KCB stated that from 2015 to August this year, it flagged and made 653 reports on suspicious transactions, among them the NYS transactions, but it never received any feedback from CBK.
However, CBK said the lenders did not do enough to stop the looting and fined them for lapses in their systems.
“CBK has reviewed each bank’s response to the penalty assessment and has concluded that the submissions were not sufficient to alter the findings of the investigations and the penalties assessed. Consequently, CBK has levied the penalties as assessed,” Governor Patrick Njoroge said.
Analysts have noted that once the scandal is dragged through the court process, banks will put up a spirited fight, which might also expose the underbelly of the regulator.