10 Local Commercial banks have been put on the spot for approving “suspicious” transactions from the suspects charged with the recent National Youth Service (NYS) scandal that has seen about SH 59B lost.
The banks include; Equity Bank, KCB, Barclays, Co-operative and CFC Stanbic.
Central Bank of Kenya (CBK) Governor Patrick Njoroge has accused the banks of overlooking guidelines laid out by CBK on anti-Money Laundering and Counter Financing of Terrorism (AML/CFT).
“There cannot be any excuse that a CEO or the board does not understand the requirements of AML/CFT or other regulations and guidelines. The issue is not guidelines or lack thereof but an issue of people not following the guidelines deliberately,” said Dr Njoroge.
CBK together with the Directorate of Criminal Investigations (DCI) has warned that the banks found guilty of flouting the industry regulations will face the law, which include a Sh20 million fines and even withdrawal of their operating licences.
“We are collaborating with investigating agencies to get to the bottom of the NYS tender scam which has resulted into loss of billions of shillings, banks involved in suspect activities will be dealt with,’ he said.
CBK REGULATIONS ON MONEY LAUNDERING
In 2016 CBK issued a Guidance Note on conducting money laundering (ML) and terrorism financing (TF) risk assessment by banking institutions, following the Sh 691 million NYS theft, now christened Season One of the massive looting of funds that has characterised the youth agency.
The CBK Guidance Note also provided guidance on the factors that banking institutions should consider when assessing their ML/TF risk exposure.
The regulations required among other things for banks to make it mandatory for a customers to fill a cash withdrawal form stating where the money is being taken and the use.
The guidelines also asked banks to monitor activities such as Frequent and unexplained movement of accounts to different institutions and Frequent and unexplained movement of funds between institutions in various geographic locations as part of their customer risk assessment.
The banks are also required on an annual basis to provide Central Bank of Kenya with a report on the latest results of its MT/TF risk assessment.
Top managers of Family Bank, where the bulk of the money stolen from NYS season one was paid to Josephine Kabura, were fired for their role in the scam. The bank’s chief Executive Officer Peter Munyiri also resigned.