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Five banks have paid a total fine of Sh385 million for failing to detect and report suspicious transactions in the National Youth Service (NYS) scandal.

Kenya Commercial Bank (KCB), Equity Bank, Co-operative Bank, Standard Chartered Bank and Diamond Trust Bank were found to have violated the provisions on the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA) where fraudulent payments were made through the lenders.

In the Sh10.5 billion NYS scandal, money was reportedly siphoned from the institution for a period of about three years in a well-orchestrated scheme involving senior civil servants and ghost suppliers.

Investigations

Director of Public Prosecutions (DPP) Noordin Haji yesterday said that investigations were conducted by the Directorate of Criminal Investigations (DCI) that revealed that the banks failed to maintain effective programmes against money laundering and conduct sufficient due diligence on some of the account holders.

The money has been paid to the Prosecutions Fund Accounts and will be returned to the institutions where money was lost. In addition to the penalties and as part of the agreements the banks will review and implement a number of corrective measures.

The measures include reviewing their ‘know your customer’ compliance status, ensuring proper supporting documentation for customer transactions, and enhancing their existing Anti-Money Laundering and Combating the Financial Terrorism monitoring systems to enable real time monitoring of digital transactions.

The probe was initiated after the Central Bank of Kenya conducted a target Inspection on the banks that revealed that apart from the administrative lapses in the internal Anti-Money Laundering controls, there was possible criminal culpability for violation of the provisions on the POCALMA.

Suspicious transactions

“The banks were however not involved in the graft but only failed to report suspicious transactions,” Haji said.

The DCI conducted investigations with regard to criminal culpability and forwarded the resultant investigation files to the ODPP.

“The DCI on the basis of investigations, made recommendations through the investigation files that charges be preferred against the bank officials for violating several provisions of the POCALMA,” Haji said.

He added: “Our independent perusal of the files revealed that there was sufficient evidence against the said banks and officials for violating the various provisions of POCAMLA.”

Having learned of the findings of the ODPP each of the banks through their respective legal representatives wrote to the office requesting to cooperate and resolve the matters in lieu of prosecution.

Bank bosses

The function was attended by the Ethics and Anti-Corruption Commission CEO Twalib Mbarak, the DCI boss George Kinoti, KCB’s CEO Joshua Oigara, Co-operative Bank’s Gideon Muriuki, DTB’s CEO Nasim Devji and other senior managers from various banks.

Diversion, a first for Kenya, is one of the multi-pronged approaches adopted by the ODPP to ensure that some criminal cases are resolved without resorting to full judicial proceedings through alternative means.

It does not focus on retributive justice whose main objective is punishing offenders, but instead focuses on compensation and restitution, restoration and reintegration. Haji said his office considered the requests in line with the decision to prosecute and need for the application of alternatives to prosecution and a decision to enter into deferred prosecution agreements was accordingly reached.

A deferred prosecution agreement (DPA) is an agreement reached between the prosecutions and a corporate organisation that would otherwise be prosecuted for a corporate offense.

The agreement is entered into pursuant to articles 17, 159 of the constitution and the diversion policy 2019 all of which allow the ODPP to defer prosecution of a particular corporate organisation undertakes.