Five Kenyan banks fined Ksh.390M for handling NYS loot

The Central Bank of Kenya has slapped hefty fines on five top banks that are alleged to have been involved in the transactions of the second phase of the National Youth Service scandal.

Investigations by CBK revealed that the five banks were used by persons suspected of transacting illegally acquired NYS funds using the financial institutions.

The five banks, which were fined a total of Ksh.394 million include; Kenya Commercial Bank, Equity Bank, Standard Chartered Bank, Diamond Trust and Cooperative Bank of Kenya.

Of the total amount, KCB will pay the highest monetary penalty of Ksh.149.5 million followed by Equity Bank which has been hit with a fine of Ksh.89.5 million and Standard Chartered Bank Kenya Ltd, whose penalty is Ksh.77.5 million.

Diamond Trust Bank and Co-operative Bank of Kenya have been fined Ksh.56 million and Ksh.20 million respectively.

A statement issued by the Central Bank on Wednesday indicates that over Ksh.3.6 billion was wired through the five banks with the largest flow of Ksh.1.6 billion having been channeled through Standard Chartered Bank.

Equity bank and KCB are reported to have handled Ksh.886 million and Ksh.639 million respectively while Diamond Trust Bank is said to have facilitated Ksh.162 million from the NYS loot.

“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,” reads the statement from CBK.

The penalties are not determined by the amount handled by the bank but by the extent of violation of monetary and banking laws.

Some of 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 (STRs) to the Financial Reporting Centre (FRC).

“The main objective of the investigations was to examine the operations of the NYS-related bank accounts and transactions, and in each instance assess the bank’s compliance with the requirements of Kenya’s Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) laws and regulations,” said CBK.

Meanwhile, Equity Bank, KCB and Diamond Trust Kenya have since confirmed receiving communication from the Central Bank on the said financial dealings and penalties.

In separate statements sent to the media, the three banks said they are reviewing the Central Bank reports and will respond to the issues raised within the stipulated 14-day period.

More banks that dealt with funds from the NYS scandal are set to be identified as further investigations continue.

“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).

“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,” reads the statement by CBK.