Five Kenyan banks will pay a combined penalty of close to Sh400 million over dealings in the National Youth Service (NYS) scam where billions were lost.
In a statement, the Central Bank of Kenya (CBK) says it has, with other agencies, been investigating banks that were used by persons suspected of transacting illegally with NYS.
CBK has prioritised banks that handled the largest flows. The banks include Standard Chartered Bank Kenya which transacted Sh1.628bn, Equity Bank Kenya 886M, KCB 639M, Co-operative Bank 263, and Diamond Trust Bank which saw 162M of the illicit funds go through its system.
The decision by CBK follows concerns that came to light in May 2018, related to the improper channelling of NYS funds into officials’ accounts.
KCB which responded to the revelations in a statement to newsrooms said that they were cooperating with the authorities on the matter.
“We are reviewing the CBK report and we will respond to the issues raised conclusively within 14 days.”
At the same time, DTB said that they had received the CBK report and would respond within the next 14 days on why the monetary penalty it has assessed should not be levied.
“We emphasise that at this point no penalty has been imposed by the Central Bank of Kenya. The bank is currently reviewing the report with a view to providing a detailed response to the issues raised within the stipulated period,” DTB added.
CBK says this was the conclusion of the first phase of the investigation of the banks that were used by these persons in transacting the NYS funds.
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.
The regulator said violations identified principally related to 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).
CBK added that the second phase of the investigations will involve using the findings by other investigators, 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,” the statement added.