Banks rush to open vaults to NYS scandal probe

Three banks penalised by the Central Bank of Kenya for their role in the National Youth Service scandal have come out to state that they will cooperate with the government in the ongoing investigation.

KCB Bank Kenya, Equity Bank and Diamond Trust Bank are among five banks that were fined by the Central Bank of Kenya for handling Ksh 3.9 billion in NYS transactions without compliance the Anti-Money Laundering Act / Combating Financing of Terrorism (AML/CFT) laws and regulations. The others are Cooperative Bank and Standard Chartered Bank.

KCB Group MD and CEO Joshua Oigara said the lender is cooperating with the authorities as part of its strict compliance with regulations and best practice that it employs across all its operations.

He said the bank has formally received notification from the CBK on the matter, which indicates the penalty for non-compliance and direction for corrective measures.

“We are reviewing the CBK report and we will respond to the issues raised conclusively within 14 days. KCB Bank remains committed to the respective banking laws across our markets of operation and international best practice,” Oigara said in a statement.

On their part, Equity Bank and Diamond Trust Bank indicated that they will respond to issues outlined by the apex bank within 14 days in a letter dated September 12, which outlines the areas of investigations.

The banks said the received the inspection report on September 10 when they met CBK officials and hastened to add that no penalty has been imposed at this stage.

The lender said they are required to show cause why the monetary penalty it has assessed should not be levied. The investigation covers NYS banking transactions for the period 2015 to 2018.

“The bank is currently reviewing the report with a view to providing a detailed response to
the issues raised by the Central Bank of Kenya within the stipulated period. We wish to reassure our stakeholders that Equity Bank is a regulated entity that respects and complies with all laws and applicable regulatory guidelines. We also wish to confirm that the Bank respects and adheres to the rules and regulations of all the countries in which we operate,” Equity Bank said in a statement.

Nasim Devji, the Diamond Trust Bank Group CEO and MD, said the bank is committed in its unwavering support to the government in its effort to eradicate corruption and to uphold the integrity of the financial system in order to build a strong stable secure financial system, a position similarly taken by Equity Bank.

According to CBK, KCB transacted Ksh 639 million, Standard Chartered Bank over Ksh 1.6 billion, Equity Bank (Ksh 886 million), Cooperative Bank (Ksh 263 million) and Diamond Trust Bank (Ksh 162 million).

As a result, the lenders have been fined a total of Ksh 392 million for the violations. Standard Chartered Bank was fined Ksh 77.5 million, Equity Bank ( Ksh 89.5 million), KCB ( kKsh 149.5 million), Cooperative Bank ( Ksh 20 million) and Diamond Trust Bank (Ksh 56 million).

In a statement, CBK said the banks were found to be in violation of the law following failure to report large cash transactions, failure to undertake customer due diligence, lack of supporting documentation for large transactions and lapses in the reporting of Suspicious Transaction Reports to the Financial Reporting Centre.

The findings have been forwarded to the Directorate of Criminal Investigations and the Office of Director of Public Prosecutions for further investigations, including establishing criminal culpability.