Senior bank executives are facing arrest and arraignment in court for their alleged role in helping ship out more than $30 million of money stolen from Kenya's National Youth Service (NYS) two years ago.
On Thursday, the Director of Public Prosecutions Noordin Haji said that he will be preparing charges against the executives, just a day after the country's regulator fined five banks $3.1 million for their role in aiding the movement of the stolen funds.
The penalised banks are KCB Group, the region’s largest bank by assets which was slapped with a $1.49 million fine, Equity Bank $895,000, Standard Chartered Bank-Kenya $775,000, Diamond Trust Bank $560,000 and Co-operative Bank of Kenya $200,000.
“The second phase of investigations will use these findings by other investigators, inter alia, and assess the criminal culpability through the Directorate of Criminal Investigations and the Office of the Director of Public Prosecutions,” CBK said in its statement, adding that more banks would be investigated.
An individual found guilty of contravening the Crime and Anti-Money Laundering Act faces a prison term not exceeding 14 years or a fine of Ksh5 million ($50,000).
This is the second financial fraud in five years involving the NYS, which has since lost more than $46 million in fraudulent deals.
The law requires all financial institutions to file daily reports with the Financial Reporting Centre on transactions above $10,000 and those deemed suspect. The regulator has accused the five banks of failing to comply with the requirements of Kenya’s Anti-Money Laundering/Combating Financing of Terrorism laws and regulations.
“From our investigations, the violations were identified, principally related to failure to report large cash transactions, failure to undertake adequate customer due diligence, lack of supporting documentation for large transactions and lapses in the reporting of Suspicious Transaction Reports to the Financial Reporting Centre,” CBK said.
Several commercial bank heads and boards are understood to have convened crisis meetings to assess their compliance levels following CBK's announcement and DPP’s confirming of the impending arrests.
The executives were summoned by the regulator on September 10, where the Central Bank made it clear they would bear responsibility for non-compliance with the financial reporting and anti-money laundering laws.
“They were told in no uncertain terms that this time round they will be on their own and would face the courts. They have been getting away with many of such transactions including the first NYS scandal, but this one will be different. This will be the biggest signal that it is not business as usual in the banking sector,” a source told The EastAfrican.
In the first NYS scandal three years ago, CBK was accused of being lenient on some of the banks that were cited for their role in aiding the movement of the stolen cash, slapping them with a maximum of $30,000 in fines.