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Five banks linked to NYS saga spared prosecution in Sh385m restitution deal

By Fredrick Obura | March 5th 2020
Director of Public Prosecutions (DPP) Noordin Haji. [Boniface Okendo/Standard](Photo: File)

Five top commercial banks linked to the second National Youth Service procurement scam will not face prosecution now that the Sh385m they paid as penalties will go back to public coffers as restitution. 

Kenya Commercial Bank, Equity Bank, Co-operative Bank, Standard Chartered Kenya and Diamond Trust Bank had agreed with the office of the Director of Public Prosecution to settle the matter outside court.

The five top commercial banks were to face criminal prosecution for facilitating the NYS scam after they received about Sh3.5 billion believed to have been stolen from the State agency.

The Central Bank of Kenya (CBK) had earlier revealed the penalties it had slapped on each of the five banks.

KCB was fined Sh149.5 million for handling Sh639 million from the NYS suspects, with the fine amounting to 23.3 per cent of the illicit cash.

Equity was ordered to pay Sh89.5 million for its role in aiding the transfer of Sh886 million, with the penalty representing 10.1 per cent of the NYS inflows.

StanChart paid Sh77.5 million despite receiving the largest sum of Sh1.6 billion.

DTB was fined Sh56 million or 34.5 per cent of the Sh162 million it received, with the lender having the largest disgorgement rate among the five institutions.

Co-op Bank paid the smallest fine of Sh20 million, representing 7.6 per cent of the Sh263 million NYS deposits it received.

In statement released on Thursday, the lawyers of the banks requested to cooperate and resolve the matters instead of prosecution.

“We considered the requests in line with the decision to prosecute and the need for the application of alternatives to prosecution and a decision to enter into Deferred Prosecution Agreements (DPAs) was accordingly reached,” reads a statement from the office of the Director of Public Prosecutions.

According to the statement, various DPAs between the ODPP and each of the banks were entered upon the payment of a total sum of Sh385,000,000 by the five banks as penalties for their respective violation of the various provisions of the Proceeds of Crime and Anti-money Laundering Act (POCAMLA).

According to the public prosecution directorate, earlier target investigations by the Central Bank of Kenya revealed that apart from administrative lapses in the internal anti-money laundering controls by some of the banks, there was possible criminal culpability for violation of the provisions on the POCAMLA.

"Subsequently, the Director of Criminal Investigations (DCI) conducted investigations concerning criminal culpability and forwarded the investigation files relating to the aforementioned commercial banks to my office," said the prosecutor.

The DCI based on the investigations made recommendations through the investigation files that charges be preferred against the banks and bank officials for violating several provisions of the POCAMLA.

The ODPP’s independent perusal of the files revealed that there was sufficient evidence against the said banks and officials for violation of the various provisions of the POCAMLA .

The provisions violated include failure to maintain effective programmes against money laundering; and failure to conduct sufficient due diligence on some of their account holders.

The Agreement announced on Thursday is normally entered into according to Articles 157, 159 of the Constitution and the Diversion Policy, 2019 all of which allow the ODPP to defer prosecution of a particular corporate entity for a set period.

The five banks committed to review and implement several corrective measures such as Know Your Customer (KYC) compliance status and ensure proper supporting documentation for customer transactions.

They also committed to enhancing existing Anti-Money Laundering and Combating the Financing of Terrorism monitoring systems to enable real-time monitoring of digital transactions, take disciplinary action against their staff involved in violating POCAMLA provisions and report to the ODPP on action taken against the staff.

Other commitments include conducting extensive Anti-Money Laundering training for all staff and their Board of Directors and undertaking remedial measures designed to enhance monitoring, on an ongoing basis, of all complex, unusual, suspicious or large transactions undertaken by customers.


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