CBA, Co-op Bank and National Bank roped into KRA tax scam

Commercial Bank of Africa, Cooperative Bank and National Bank have also been sucked into the tax evasion ring feared to have cost the country billions of shillings in lost taxes.

This is after the Kenya Revenue Authority (KRA) hurriedly took several employees of the banks alongside those of Equity Bank to charge them for their role in the scam. KRA busted the tax evasion ring late last year but a series of cover ups have slowed down investigations into the scandal that insiders say could ran into transactions of over Sh.68 billion over the last three years.

Yesterday, in an indication of just how deep the theft had gone, KRA said it has extended investigations to other banks.

“Other banks under investigation on tax fraud include the National Bank of Kenya, Commercial Bank of Africa and Cooperative Bank of Kenya. Similar investigations will be extended to other banks where necessary,” the taxman revealed.

The rip-off, involving key authorised collecting agents who collude with KRA staff. Equity Bank was the first lender to confirm that two of its staff and some KRA officers had been linked to the scandal in which Sh.124 million in import duty was lost.

The bank said it had handed the two staff to KRA to allow for prosecution. But there was drama when one employee of Equity Bank disappeared hours before being arraigned in court. An arrest warrant was issued for the Equity employee who failed to show up.

KRA said in a statement yesterday that only one of the two Equity bank staff mentioned in the scam made it to court yesterday to face tax evasion related charges. “The staff was presented before Milimani Chief Magistrate, Charles Ogembo facing eight tax evasion related counts including conspiracy to evade payment of duty and interfering with information stored in customs computerised system as KRA steps up efforts to seal revenue leakage loopholes,” KRA spokesperson Grace Wandera said in a statement.

Equity Bank Namanga Branch Cash Officer Douglas Wachira Gikunju denied the charges and was released on a one million cash bond. “A warrant of arrest has been issued for the Operations Manager, Benson Rwara Kabuu,” the statement added.

KRA said the two bankers, are suspected to be members of an elaborate tax evasion ring that has been fraudulently interfering with the KRA Simba System. Arising from the scam, the two bankers faced charges implicating them in the potential loss of Sh.124 million.

Also to be prosecuted are the clearing agents, importers and the KRA staff colluding with the bank staff in perpetrating the vise. “An investigation into the role played by KRA staff in the fraud is at an advanced stage with a view to have them prosecuted.”

KRA said it is committed to ensuring that any member of staff involved in facilitating tax evasion is dealt with.

It is understood that KRA and employees of several banks colluded to manipulate the Simba system to fake clearance when actually no tax was paid. Recently, a National Bank of Kenya staff, Kennedy Otieno Juma was charged before court with the offence of interfering with information stored in the customs computerised system. Further investigations are in progress to arraign more suspects in court. The matter will be heard on April 7, at the Milimani law courts. In a related incident, two employees of Cooperative Bank of Kenya, Leviscus G Njeru and Ian Martin Ochieng were also charged alongside three employees of clearing firms for involvement in tax fraud.

“The bank officials were charged with an offence of interfering with information stored in the customs computerised system, while the clearing firm agent employees were charged with an offence of conspiracy. The matter is scheduled for hearing on May 3, at the Mombasa Law courts,” the statement added.

As part of its corporate transformation programmes, KRA, is enhancing the security of its systems to ensure no unauthorised data access and manipulation leading to revenue leakage.

The new tax scandal, which is set to rock Times Towers, comes at a time when the authority is conducting a lifestyle audit on its key staff in an effort to root out rogue employees diverting tax money to their pockets.

But the revelations by Equity Bank are an indicator of just how deep the plot is. A reconciliation jointly done by KRA and operations staff at Equity revealed that a total of 2,926 transactions worth Sh123.6 million and which involved 916 taxpayers were initiated in the tax collector’s operations system, Simba 2005 without corresponding transactions in the lender’s systems.