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Investigations revealed that insider fraud oiled through collusion of senior executives coupled with doctored and false financial reporting systems led to the loss of more than Sh20 billion of depositor funds at the collapsed Imperial Bank.
Forensic investigations also point fingers of complicity at the Central Bank of Kenya (CBK) which regulates financial institutions in the country.
For instance, documents revealed there existed a special loans list at Imperial Bank which included an empty entry for CBK loan. The document does not, however, indicate if the loan was for CBK as an institution or for its employees.
These were the findings of American forensic audit firm, FTI Consulting, even as shareholders of the bank this February sued the Central Bank of Kenya and the Kenya Depositors Insurance Corporation (KDIC) over liquidation of the bank against a ruling by Justice George Odunga suspending the process in November 2016.
FTI Consulting also revealed that there lacked adequate internal and external audit at Imperial Bank in the duration of the said fraud.
The investigations put the losses in access of Sh34 billion which comprises Sh20 billion principal amount and interest.
The forensic report show that the general ledger was manipulated through use of a report writer programmed to suppress postings, such that, the general ledger did not reflect the true picture recorded through the core banking system.
The general ledger is the backbone of any accounting system which holds financial and non-financial data. Additionally, fraudulent journal entries were passed within the general ledger to transfer funds between accounts and re-classify assets, a development that the investigators say was perpetuated through circumventing good banking practice and accounting standards.
The forensic report shows that although Imperial Bank had a clear credit approval process and documentation, this process was circumvented in the award of loans amounting to more than Sh20 billion. The report show that while a loan worth more than Sh50 million was supposed to be approved by the bank’s Board Executive Committee (BEC) comprising the chairman, the group managing director and three non-executive directors, this was not the case in numerous cases.
For example, the bank’s then group managing director, the late Abdulmalek Janmohamed, authorised loan disbursements in instances where loan applications were rejected by the BEC or where such applications were never presented to the BEC.
The report says the bank’s defined credit process was circumvented by Janmohamed with the assistance of some senior management staff.
It is not clear why these illicit financial activities went on at the bank for more than 10 years without the bank’s internal and external auditors or the Central Bank of Kenya (CBK) inspection and supervisory staff raising a red flag.
And an affidavit filed in court claims some officers of CBK, the Imperial Bank statutory manager’s appointing authority may have been involved in the cover-up of some suspect transactions at the bank.
The financial report by the US firm has revealed that as early as 2012, a whistleblower had raised a red flag about possible money-laundering and tax evasion through an email to the Kenya Anti-Corruption Commission (KACC), The Treasury and the CBK among other government agencies.
Documents show that a Richard Cheres of CBK shared this information with James Kaburu, the then Chief Financial Officer (FCO) at Imperial Bank and demanded for more details on the bank’s top 50 largest borrowers. However, Kaburu in his response to Cheres denied any money-laundering or tax evasion being perpetuated at the bank.
Cheres demanded info on the said biggest borrowers but it’s not clear how CBK utilised the info it received from Imperial Bank on the suspect accounts way back in 2012 before the bank was later placed under receivership in 2015.
The new details are contained in an explosive affidavit filed in court by Imperial Bank and its shareholders in a case it has sued W.E.Tilley (Muthaiga) Ltd and 19 other entities and individuals over the collapse of the bank.
W.E.Tilley is a multi-billion family owned business empire with interests in fishing, mining, real estate, food processing and water bottling. It is headed by Firoz Jessa and family and had numerous accounts at Imperial Bank which were used for various transactions by its sister companies.
W.E.Tilley owned up and agreed to refund Imperial Bank Sh10 billion of loaned money.
