The Central Bank of Kenya (CBK) slapped three commercial banks with a fine totalling Sh3 million for failing to report suspicious transactions relating to the Sh791 million National Youth Service (NYS) scandal, Governor Patrick Njoroge revealed in Parliament Thursday.
Dr Njoroge said the banking industry regulator also forced the sacking of nine top managers of Family Bank where the bulk of the money stolen from NYS was paid to Ms Josephine Kabura, the businesswoman at the centre of the scandal.
He told the National Assembly’s Public Accounts Committee (PAC) that four other managers at Sidian Bank, formerly known as K-Rep, are undergoing tests that the CBK is undertaking to ascertain whether that they are fit to hold office.
Central Bank says it is also vetting managers of Faulu Microfinance who were involved in transactions connected to the NYS loot.
Dr Njoroge said the banking regulator is seeking to amend the CBK Act to enhance the maximum penalty to be meted on banks that flout the law.
Following information received from the Financial Reporting Centre (FRC) on specific transactions, the CBK conducted a targeted inspection on Family Bank that eventually led it to Sidian Bank and Faulu Microfinance.
“We established that there have been cases of flouting prudential guidelines and we took enforcement action. We levied a maximum penalty to Family Bank. We fined them Sh1 million. We also required re-vetting of nine officers who were responsible since there was culpability on their part,” he said.
Dr Njoroge said the findings at Family bank, Sidian Bank and Faulu were presented to the FRC who are allowed by law to take up any criminal charges against the officers found culpable.
“They are allowed to take up criminal charges. They have corresponding responsibility which is in their domain,” he said.
Dr Njoroge said when CBK conducted targeted inspection, it saw transactions leading to other banks.
“We went to those subsequent banks and did targeted inspection. At Faulu Microfinance, we saw some transactions and we followed the money trail. We levied penalties to this bank. The third bank (Sidian) we saw that there has been some infractions and taken action to enforce. We imposed a maximum penalty of Sh1 million to each of the banks,” he said.
Ignored red flag
Dr Njoroge also turned the spotlight on Treasury Director General Accounting services and the Ministry of Devolution where the NYS fell under at the time of the scandal.
Credit: Business Daily