Cyrus Ombati
CEOs of five local banks have escaped prosecution over their role in the
multi-million-shilling National Youth Service (NYS) scandal after
paying Sh385 million.
The money was deposited into a prosecution fund after the CEOs of KCB
Group, Equity Bank Kenya, Standard Chartered Bank, Diamond Trust Bank,
and Cooperative Bank struck a deal with Director of Public Prosecutions
Noordin Haji in an arrangement referred to as a Deferred Prosecution
Agreement (DPA).
DPA is a voluntary alternative to adjudication in which a prosecutor
agrees to grant amnesty in exchange for the defendant agreeing to
fulfill certain requirements.
The prosecution fund is a special kitty set up by the DPP through which
money amassed through graft will be collected and returned to the
public.
The five bank chiefs were expected to face criminal prosecutions for
failing to report suspicious transactions, as required by the law, in
the scandal where taxpayers’ millions were looted.
The money was lost through a syndicate that saw some individuals paid for supplying air to NYS.
And yesterday, Mr Haji announced the CEOs would not be prosecuted after the banks paid the amount.
The CEOs had been accused of facilitating the NYS scam by receiving
about Sh3.5 billion believed to have been stolen from the State agency.
The Central Bank of Kenya (CBK) had earlier revealed penalties it
slapped on each of the five banks. KCB Group was fined Sh149.5 million
for handling Sh639 million from NYS suspects. The fine was 23.3 per cent
of the illicit cash.
Equity was ordered to pay Sh89.5 million for aiding the transfer of
Sh886 million. The penalty represented 10.1 per cent of the NYS cash.
Standard Chartered paid Sh77.5 million despite receiving the largest sum
of Sh1.6 billion.
DTB was fined Sh56 million or 34.5 per cent of the Sh162 million it
received, the largest disgorgement rate among the five banks. Co-op Bank
paid the smallest fine of Sh20 million, or 7.6 per cent of the Sh263
million NYS deposits it received.
CBK inspected the banks and discovered apart from administrative lapses
in the internal anti-money laundering controls, there was possible
criminal culpability due to violation of Proceeds of Crime and
Anti-money Laundering Act (POCAMLA).
“Subsequently, the Directorate of Criminal Investigations conducted
investigations regarding criminal culpability and forwarded files
relating to the aforementioned commercial banks to my office,” said
Haji.
He said there was sufficient evidence against the banks and officials
for violating various provisions of POCAMLA, including failure to
maintain effective programmes against money laundering and failure to
ensure due diligence on some of their account holders.
“Each of the banks, through their respective legal representatives,
wrote to us requesting to cooperate and resolve the matters in lieu of
prosecution,” said Haji, who spoke in his office in the presence of the
five CEOs.
Haji said he considered the requests in line with the decision to
prosecute and the need to apply alternatives, hence the decision to
enter into DPA.
“In addition to the penalties and as part of the agreements, the banks
committed to review and implement a number of corrective measures. They
undertook to, among other things, review their Know Your Customer
compliance status and ensure proper supporting documentation for
customer transactions,” said Haji.
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