The Central Bank of Kenya has penalized five banks a total of Sh392 million for violating financial transaction rules in respect to the handling of the National Youth Service scandal that was exposed this year.
The Banks include Standard Chartered Bank (StanChart), Equity Group, KCB Group, Co-operative Bank of Kenya Ltd, and Diamond Trust Bank (DTB).
The five banks handled a total of Sh3.5 billion from NYS with StanChart handling the largest transaction worth Sh1.6 billion followed by Equity Bank at Sh886 million, while KCB processes Sh639 million.
The regulator says this is the first phase of the investigation where the banks in question violated the requirements of Kenya’s Anti-Money Laundering/Combating Financing of Terrorism laws and regulations.
The violations include 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 has discussed the detailed findings with Boards of Directors and Senior Management of each of the banks. Each has expressed their strong commitment to be fully compliant on all aspects of the law, and addressing the identified lapses through time-bound Action Plans. These Actions Plans will be submitted to the CBK within fourteen (14) days and CBK will closely monitor their implementation. More generally, CBK will work with all other banks to ensure that these findings are also applied to strengthen all AML/CFT frameworks,” CBK says in a statement.
CBK has shared the findings with the relevant investigative agencies for their appropriate action. Further, an additional set of banks will also be identified and investigated.
KCB Group has been penalized the highest at Sh149.5 million followed by Equity Bank at Sh89.5 million while Standard Chartered Bank will pay Sh77.5 million. DTB has been fined Sh56 million while Co-operative Bank will pay Sh20 million.
“The second phase of the investigations will involve use of these findings by other investigators, inter alia, assessment of criminal culpability by the Directorate of Criminal Investigations (DCI) and the Office of the Director of Public Prosecution (ODPP),” the regulator notes.
The Director of Criminal Investigations (DCI) George Kinoti has since set up a team to investigate the Sh9 billion lost.
The team is seeking to establish how taxpayers money could have been siphoned from the NYS by unscrupulous individuals.
Over 40 individuals have been summoned, questioned and others charged to explain their role in the scandal that has threatened to cripple the running of the state department.
Among the individuals include two state officers – including the former Principal Secretary in the State Department of Public Service and Youth, Lilian Omollo, and former National Youth Service Director General, Richard Ndubai who have since stepped aside to facilitate the ongoing investigations.
Among the officials summoned include Omollo and Ndubai, as well as accountants, supplies management officials and procurement officers.
The Ministry of Public Service, Youth, and Gender Affairs has since indicated that the payments of all pending bills have been suspended to cushion against any further loss of public funds at NYS.