CBK gives nod to prosecution of ex-Family Bank staff linked to NYS heist

CBK boss has endorsed prosecution of former Family Bank officials, a verdict that has sent jitters in the banking industry.

On Friday, Central Bank of Kenya Governor Patrick Njoroge in response to a letter from Director of Public Prosecutions Keriako Tobiko dated August 12, okayed prosecution of the officials and added that the planned action would not have a direct bearing on the industry.

Mr Tobiko had sought the advice from the CBK governor on whether the prosecution would rattle the industry, but Njoroge reckoned that such a move would instead bring about a sense of responsibility.

“The prosecution of the officials will have a positive effect on the sector and enhance accountability,” said Dr Njoroge in response.

The move will no doubt set the stage for possible investigation into other officials in other banks in a case linking them to theft of Sh791 million at the National Youth Service (NYS). The officials were accused of failing to comply with reporting rules of huge cash transaction.

A number of banks mentioned in the National Youth Service scandal have raised concern with the latest CBK endorsement in a scam in which NYS is estimated to have lost Sh1.6 billion.

The players told the Parliamentary Accounts Committee (PAC) they were concerned because it was not only Family Bank that was involved in the vice but almost 15 other institutions. This means they may be affected too.

So far CBK has fined Family, Sidian and Faulu banks over the scandal. It’s alleged that these banks handled Sh1.6 billion NYS cash that passed through Family Bank.

Some MPs at PAC raised concern because not all the banks involved have disclosed how much of the NYS money went through their institutions and that it was difficult to know the magnitude of the transactions at the Government agency.

“We are concerned that this is only seen as a Family Bank affair. More than ten banks have appeared before the committee and NYS money was actually paid through them,” said a member of the committee aware of the proceedings.

The CBK itself, Standard Chartered, Barclays Bank, Faulu, GT, National Bank, Old Mutual and KCB have appeared before the PAC to shed light on the NYS saga.

These institutions were summoned to appear after the Auditor General in his report established that it was not only Family Bank that handled the NYS money, but several other players where transaction took place need also to shed light on the matter.

The National assembly PAC is in its tail end in probing the saga and has been summoning witnesses and suspects in the same listening to their testimonies.

In the letter Njoroge said the prosecution of Family Bank officials implicated in the scam would send a strong message to banking sector players.

Non-compliance

“The prosecution of Family Bank and other related parties involved in non–compliance with reporting rules is unlikely to have an adverse impact on the bank. On the contrary, it will have a positive effect on the sector and enhance accountability,” he said.

All the Sh1.6 billion NYS cash was paid out in three accounts held at Family Bank, after which they were transferred to other bank accounts held by the suspects, who have been charged in court.

Director of Public Prosecution Keriako Tobiko directed the investigators to seek expert opinion on whether by charging the bank there would be a crisis in the sector.

The officials are supposed to be charged for failure to report the unusual NYS transactions to the Financial Reporting Centre (FRC) for action.

Parliament in its own motion opened investigations into the scandal, despite pending court cases touching among others, inluding former PS Peter Mangiti, former NYS director general Nelson Githinji and 22 other suspects.

Former Devolution CS Anne Waiguru has linked the Office of the Deputy President William Ruto to the irregularities by naming the DP’s aide Farouk Kibet.