Five banks forfeit Sh385m to prosecution fund in deferred prosecution deal
By Cyrus Ombati
| March 6th 2020
CEOs of five local banks have escaped prosecution over their role in the multi-million-shilling National Youth Service (NYS) scandal after paying Sh385 million.
The money was deposited into a prosecution fund after the CEOs of KCB Group, Equity Bank Kenya, Standard Chartered Bank, Diamond Trust Bank, and Cooperative Bank struck a deal with Director of Public Prosecutions Noordin Haji in an arrangement referred to as a Deferred Prosecution Agreement (DPA).
DPA is a voluntary alternative to adjudication in which a prosecutor agrees to grant amnesty in exchange for the defendant agreeing to fulfill certain requirements.
The prosecution fund is a special kitty set up by the DPP through which money amassed through graft will be collected and returned to the public.
The five bank chiefs were expected to face criminal prosecutions for failing to report suspicious transactions, as required by the law, in the scandal where taxpayers’ millions were looted.
The money was lost through a syndicate that saw some individuals paid for supplying air to NYS.
And yesterday, Mr Haji announced the CEOs would not be prosecuted after the banks paid the amount.
The CEOs had been accused of facilitating the NYS scam by receiving about Sh3.5 billion believed to have been stolen from the State agency.
The Central Bank of Kenya (CBK) had earlier revealed penalties it slapped on each of the five banks. KCB Group was fined Sh149.5 million for handling Sh639 million from NYS suspects. The fine was 23.3 per cent of the illicit cash.
Equity was ordered to pay Sh89.5 million for aiding the transfer of Sh886 million. The penalty represented 10.1 per cent of the NYS cash. Standard Chartered 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, the largest disgorgement rate among the five banks. Co-op Bank paid the smallest fine of Sh20 million, or 7.6 per cent of the Sh263 million NYS deposits it received.
CBK inspected the banks and discovered apart from administrative lapses in the internal anti-money laundering controls, there was possible criminal culpability due to violation of Proceeds of Crime and Anti-money Laundering Act (POCAMLA).
“Subsequently, the Directorate of Criminal Investigations conducted investigations regarding criminal culpability and forwarded files relating to the aforementioned commercial banks to my office,” said Haji.
He said there was sufficient evidence against the banks and officials for violating various provisions of POCAMLA, including failure to maintain effective programmes against money laundering and failure to ensure due diligence on some of their account holders.
“Each of the banks, through their respective legal representatives, wrote to us requesting to cooperate and resolve the matters in lieu of prosecution,” said Haji, who spoke in his office in the presence of the five CEOs.
Haji said he considered the requests in line with the decision to prosecute and the need to apply alternatives, hence the decision to enter into DPA.
“In addition to the penalties and as part of the agreements, the banks committed to review and implement a number of corrective measures. They undertook to, among other things, review their Know Your Customer compliance status and ensure proper supporting documentation for customer transactions,” said Haji.
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