Second hand cars at Mombasa port after being offloaded from a cargo
ship. The NTSA, which registers motor vehicles, said forgery of
registration documents was on the rise and had reached alarming levels.
PHOTO | FILE
By EDWIN OKOTH, edokoth@ke.nationmedia.com
In Summary
- Investigations by the Business Daily show that the banks — driven by stiff competition in the lending market — have partly helped the criminals’ cause by disbursing money before due diligence is done and authenticity of documents is confirmed.
- The fake car registration syndicate was thrust to the public domain last month after the taxman impounded a number of vehicles and listed 124 others as owing close to Sh500 million in unpaid import duty.
- Five of the impounded cars were registered to commercial banks.
- Bankers have complained that vehicle registration records at the NTSA are not reliable even in cases where due diligence has been done, further exposing them to the fraud cartel.
A syndicate of fraudsters is using fake car
registration documents to access loans from financial institutions,
exposing the lenders to loss of funds and leaving the genuine car owners
exposed to legal action by the banks.
Investigations by the Business Daily show that the
banks — driven by stiff competition in the lending market — have partly
helped the criminals’ cause by disbursing money before due diligence is
done and authenticity of documents is confirmed.
Bankers have also complained that vehicle
registration records at the National Transport and Safety Authority
(NTSA) are not reliable even in cases where due diligence has been done,
further exposing them to the fraud cartel.
The fake car registration syndicate was thrust to
the public domain last month after the taxman impounded a number of
vehicles and listed 124 others as owing close to Sh500 million in unpaid
import duty.
Five of the impounded cars were registered to
commercial banks. This means that the cars, most of whose owners insist
they paid all the taxes and have loans with banks, were fraudulently
used to secure loans.
Equity Bank, Family Bank, Sidian Bank and the
collapsed Imperial Bank were in the Kenya Revenue Authority’s (KRA) list
of tax defaulters, meaning they have in their books cars with
questionable documentation.
Motor dealers Tripple One Motots and Japan Africa Marketing Company were also in the list.
Forgery on the rise
The NTSA, which registers motor vehicles, said
forgery of registration documents was on the rise and had reached
alarming levels.
NTSA director for registration and licensing
Jacqueline Githinji said the authority had acquired a computerised
system to help banks conduct quick online searches and weed out the
fraudsters from the lending market.
“In many of the cases, we write to the banks but
unfortunately sometimes the person coming for the letter is part of the
ring so it never gets to the bank in time before the loan is advanced,”
Ms Githinji said.
Habil Olaka, the Kenya Bankers Association (KBA)
chief executive, did not respond to questions on the matter by the time
of going to press.
Bankers, however, said the log books syndicate has
forced the lenders to tighten use of cars as collaterals in securing
loans, often to the disadvantage of genuine borrowers.
Banks account for up to 7,000 of the 9,000 transfer requests
that the NTSA handles every month. The NTSA has also established a
special desk that handles the logbooks and from where the banks collect
the documents every Wednesday and Friday.
A mainstream banker, who spoke to us in confidence,
said use of logbooks to secure loans has soared as Kenya continues to
receive thousands of used vehicles from Asia and Europe every year.
“In many cases we wait for the generic slip showing
the logbook has been received at NTSA and the money is released. It has
worked in many occasions but we have also many times found out that the
logbooks were fake or the number plates irregular,” the banker, who is
an asset finance officer, said.
His bank, which claims to have the largest number
of customers, recently suspended an employee in the loans department
after a Sh13 million loan on a Range Rover fell into arrears only for
the recovery units to find the registration details were that of a
Toyota Probox.
The officials are now required to pause for a photo
with the motor vehicle being financed or used as security during
valuation and write a detailed description of the car before admitting
it as security.
A call at one of the city lenders where one can
borrow up to 50 per cent the car value and get the funds in 12 hours
showed that indeed one does not have to wait to have the vehicle
transferred.
Meridian Acceptances managing director James Ndwiga
confirmed having handled cases where the lender is unable to auction a
recovered car because of double or fake registration.
“We don’t understand what happens when the first
search indicates that the vehicle is fine only to find out after default
that the details belonged to some other vehicle.
“I have an incident now where we cannot auction a
Q7 because its registration at NTSA says it is a lorry. Incidentally, I
saw a Subaru Outback with the same registration, meaning there may be
three cars bearing the same number,” said Mr Ndwiga.
The quick lender suffered a Sh22 million loss from a
similar scam in 2011, the same year when the KRA raised alarm over the
disappearance of 1,000 logbooks in two batches, one in June 2011 and the
other in January 2012.
Two employees were later suspended in 2013 as logbooks believed to be in circulation remained at large.
One batch of logbooks has serial numbers ranging
from S172501 to S173000 while the other batch has serial numbers of
between S363501 and S364000.
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