Parliament is seeking punitive fines for bank executives who fail to disclose suspicious transactions in a fresh bid to block the flow of stolen taxpayers’ cash.
Financial institutions are required to report all transactions above $10,000 (Sh1,030,000) to The Financial Reporting Centre (FRC), the state agency that tracks proceeds of crime, but many do not do so.
Currently, banks are charged Sh1 million for failing to disclose suspicious transactions, an amount that analysts argue cannot deter lenders from the vice.
The Public Accounts Committee (PAC) wants the fines raised in the wake of multi-billion shilling scandals which were made easy by lax reporting of suspicious transactions by banks.
“… Parliament proceeds to immediately review and subsequently amend the Banking Act and other financial laws and regulations… to substantially increase the maximum fine levied by the Central Bank of Kenya (CBK) on non-compliant financial institutions,” recommends PAC in the wake of the NYS probe.
Last year, CBK slapped three banks with Sh1 million fine each for failing to report suspicious transactions relating to the NYS scandal where nearly Sh2bn was lost.
The fine is a small fee for a sector which makes billions of shillings in profits annually.
Manipulation of the government’s financial management software, outright forgery, and neglect of duty enabled the theft of the billions from the National Youth Service, the auditor-general has revealed.
The NYS cash was illegally moved through banks into individual pockets and ultimately used to buy personal assets. Lax controls also aided theft of millions of shillings at the Youth Fund and the auditor- general’s office.
Parliament has ordered the anti-graft agency to investigate 29 banks that handled billions of shillings stolen from NYS.
The banks named by PAC include African Banking Corporation, Bank of Africa, Bank of Baroda, Barclays, CFC Stanbic, Chase Bank, Consolidated, Co-operative Bank, Credit Bank, Ecobank, Equity and First Community Bank.
Others are Guaranty Trust Bank, Gulf African, Housing Finance, I&M, Jamii Bora, NIC, Paramount, Sidian, Standard Chartered, Transnational, Faulu, Old Mutual and National Bank of Kenya.
PAC last week ordered fresh investigations into CBK Governor Patrick Njoroge’s role in the NYS scam.
The committee wants the CBK governor investigated for failing to prevent movement of stolen funds through the banking system and failing or refusing to advise the government on the abnormal payment requisitions from the Ministry of Devolution and the NYS as provided for under the CBK Act.
“The CBK was the source of all the funds that were paid to commercial banks and other institutions for onward payments to NYS suppliers,” the PAC said in the report.
“It is apparent that the CBK was used as a conduit for transfer of funds that were irregularly paid to suspect companies for goods and/or services not delivered.”
Credit: Business Daily