StanChart prepares for extra NYS cash penalty

Standard Chartered ATM lobby in Nairobi. FILE PHOTO | NMG 

By VICTOR JUMA
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Summary

• CBK last year fined the lender Sh77.5 million for failing to flag and stop the cash movements.
• KCB, Equity, DTB and Co-op Bank were also fined a total of Sh315 million for similar offences.
• StanChart’s London-based parent Standard Chartered Plc has told its investors that the local subsidiary could face more financial consequences in the ongoing investigations.

Standard Chartered Bank (Kenya) is bracing itself for potential further financial penalties for its role in the handling of Sh1.6 billion that was siphoned from the National Youth Service (NYS).

Central Bank of Kenya (CBK) last year fined the lender Sh77.5 million for failing to flag and stop the cash movements.

KCB, Equity, DTB and Co-op Bank were also fined a total of Sh315 million for similar offences.

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The five banks aided the flow of Sh3.5 billion in transactions that flouted anti-money laundering laws and other rules.

StanChart’s London-based parent Standard Chartered Plc has told its investors that the local subsidiary could face more financial consequences in the ongoing investigations.

“The Director of Public Prosecutions (DPP) and related agencies in Kenya are investigating Standard Chartered Kenya Limited (SCBK) and other banks in connection with the alleged theft of funds from Kenya's State Department of Public Service, Youth and Gender Affairs,” the multinational said in disclosures to its investors.

“The group does not know whether any charges will be brought, but there may be penalties or other financial consequences for SCBK in connection with this investigation.”

The lender said the Directorate of Criminal Investigations had asked the DPP to charge a number of banks, including StanChart, officials and other individuals.

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It was not clear whether the banks have already paid the fines imposed by CBK last year. Some of the lenders had indicated that they would contest the penalties.

Using its discretionary powers, the CBK issued fines that saw some banks punished more severely despite handling relatively smaller sums, signalling that the regulator also took into account qualitative factors such as repeated offences and sloppy cultures that abetted the illicit transactions.

KCB was fined Sh149.5 million, arguably the largest sum that a Kenyan bank has been penalised and which has been disclosed to the public. The country’s biggest bank received Sh639 million from the NYS suspects, with the fine amounting to 23.3 per cent of the illicit cash.

While the fines ranging from Sh20 million to Sh149.5 million are significant, they will have a marginal impact on the profitability of the lenders for the year ended December 2018.