- The five banks, Standard Chartered Kenya
- , opted to pay the DPP a total of Sh385 million to save its executives from criminal prosecution over NYS dealings.
- Mr Haji told the lenders that they risk prosecution should they demand reimbursements from insurance firms to cover the millions paid to the office of DPP and Central Bank of Kenya (CBK) for facilitating the fraud.
- Under the deal, the agreement also requires the bank to implement various anti-money laundering measures, which include taking disciplinary action against all staff members who were involved or implicated in the scandal.
Summary
Director of Public Prosecutions (DPP) Noordin Haji has warned
five banks against seeking insurance compensation for the Sh721 million
fine that was imposed on the lenders for failing to report suspicious
transactions linked with the theft of funds at the National Youth
Service (NYS).
Mr Haji told the lenders that they risk
prosecution should they demand reimbursements from insurance firms to
cover the millions paid to the office of DPP and Central Bank of Kenya
(CBK) for facilitating the fraud.
The five banks,
Standard Chartered Kenya , Equity , Diamond Trust , Co-operative Bank ,
and KCB Group , opted to pay the DPP a total of Sh385 million to save
its executives from criminal prosecution over NYS dealings.
The
DPP reckons that the prosecution deal could be terminated if the banks
seek compensation for the payouts, which also includes the Sh392.5
million fine that CBK imposed on the five lenders for breach of banking
regulations while handling the NYS cash.
The five top
commercial banks were to face criminal prosecution for facilitating the
NYS scam after they received about Sh3.5 billion believed to have been
stolen from the State agency. The banking sector regulator said that the
banks had failed to report large transactions or to undertake proper
due diligence on customers. It also accused them of approving large
transactions without proper documents.
“The bank shall not seek or accept directly or indirectly
reimbursement or indemnification from any source with regard to the
payment or any other payment under agreement entered into with the
Central Bank of Kenya or any other national agency in relation to the
offences,” says the plea bargain agreement between the banks and the
DPP. “The bank and the ODPP agree that this settlement is appropriate
given the facts, nature and circumstances of this case and that it is
public interest to defer the prosecutions.”
Under the
deal, the agreement also requires the bank to implement various
anti-money laundering measures, which include taking disciplinary action
against all staff members who were involved or implicated in the
scandal. “The bank shall institute an internal disciplinary mechanism
related to the offences and shall report to the ODPP within the term the
action taken against the staff if found culpable,” says the agreement
between the DPP and the lenders.
Under the agreement,
the banks were compelled to provide information that would help State
agencies nab persons suspected to have siphoned cash from the NYS. The
ODPP said that it would today reveal what each of the five banks had
paid to avoid prosecution.
StanChart had last Thursday
disclosed that it had paid Sh100 million to the DPP under the plea
bargain deal. “In December 2019, Standard Chartered Bank Kenya (SCBK)
agreed a settlement of this matter with the DPP,” Standard Chartered
Plc, which owns 73.8 percent of its local affiliate, said in disclosures
to the London Stock Exchange. Standard Chartered Bank Kenya had in
December 2018 announced the exit of chief executive Lamin Manjang, who
was at the helm when the bank received Sh1.6 billion from the NYS. He
was replaced by Kariuki Ngari.
CBK had earlier revealed
the penalties it had slapped on each of the five banks. KCB was fined
Sh149.5 million for handling Sh639 million from the NYS suspects, with
the fine amounting to 23.3 percent of the illicit cash. Equity was
ordered to pay Sh89.5 million for its role in aiding the transfer of
Sh886 million, with the penalty representing 10.1 percent of the NYS
inflows.
StanChart paid Sh77.5 million despite
receiving the largest sum of Sh1.6 billion. DTB was fined Sh56 million
or 34.5 percent of the Sh162 million it received, with the lender having
the largest disgorgement rate among the five institutions.
Co-op Bank paid the smallest fine of Sh20 million, representing 7.6 percent of the Sh263 million NYS deposits it received.
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