The Central Bank of Kenya (CBK) has fined five local banks a total of 392.5 million shillings for handling illegal transactions that saw about Sh 9B looted in the latest National Youth Service (NYS) scandal.
KCB has been fined Sh149.5 million, Standard Chartered Bank (Sh77.5 million), Equity Bank (Sh89.5 million), Cooperative Bank (Sh20 million), and DTB (Sh56 million).
According to CBK, these banks are part of 10 that have been under investigations for flouting industry regulations and were prioritized because they handled the highest amounts.
“CBK announces the conclusion of the first phase of the investigation of the banks that were used by these persons in transacting the NYS funds. The investigations prioritized banks that handled the largest flows,” CBK said in a statement.
In May, CBK put 10 Local Commercial banks on the spot for approving “suspicious” transactions associated with suspects charged in the NYS scandal with Governor Patrick Njoroge accusing the banks of overlooking guidelines laid out by Central Bank 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 at the time.
Njoroge further warned that banks found guilty of flaunting the industry guideline would face the law.
“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.
According to CBK the five banks were found guilty of violating the law for failing to report large cash transactions and failure to undertake adequate customer due diligence. The banks also lacked supporting documentation for large transactions.
“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,” CBK said.
Principal Secretary Lillian Mbogo-Omollo and the former Director-General of the NYS, Richard Ndubai are among 19 suspects arrested and charged over Sh9 billion ($90 million) siphoned from the National Youth Service.