Powerful leaders fighting financial sector changes

By STEPHEN MAKABILA

Influential personalities in and outside the Government are seeking to block reforms in financial sector to ensure they preserve entrenched interests, a report on closed Charterhouse Bank says.

The report, which US Ambassador to Kenya Michael Ranneberger handed the Kenya Anti-Corruption Commission (KACC) last week, also urges for more political backing to act on the bank scandal.

"This propensity to block the financial reform process is clearly evident in the recent developments related to Charterhouse Bank," reads part of the report.

It indicates KACC Director PLO Lumumba has limited ability to "do the right thing" so long as certain key KACC officials remain in place.

"Contacts agreed that Prof Lumumba should step forward on the Charterhouse issue to demonstrate that KACC cannot be manipulated and that in a new Kenya, impunity will not be tolerated. The Government must provide political backing for this to occur."

Propensity to block

The report contains contents of investigative reports from 2004 by the Central Bank of Kenya, ministerial statement on the inter-agency investigation on economic crimes by Charterhouse, and a report from the PriceWaterhouse Coopers. According to the report, since the August 4 referendum, influential people in and outside the Government are seeking to block significant reforms to ensure they preserve vested interests in the new constitutional dispensation.

"This propensity to block the financial reform process is clearly evident in the recent developments related to Charterhouse Bank," read the report.

The bank was placed under statutory management in June 2006, following investigation that yielded evidence of financial crimes, including money laundering and tax evasion.

Between 1999 and 2006, the bank reportedly helped influential traders to avoid paying at least Sh20.2 billion ($250 million) in taxes and may have been involved in other irregular and illegal transactions totalling Sh40.6 billion ($500 million).

Opposed re-opening

The bank owners and their proxies have aggressively challenged its closure by the Central Bank in multiple jurisdictions and in hearings launched by the Parliamentary Committee on Finance.

Committee proceedings have featured reports from various agencies and offices, all stating there was no evidence against the bank and apparently there is nothing standing in the way of its re-opening.

Among those who have opposed re-opening of the bank include Mr Ranneberger.