The Central Bank of Kenya (CBK) has reported that the kitty that holds fines paid by banks in breach of regulations grew 20 times due to the penalties imposed on lenders for helping corrupt senior government officials in hiding suspicious transactions connected with the theft of funds at the National Youth Service (NYS).
In its financial statement for the year to June 2019, which was released Friday, CBK says that the fines kitty had Sh420 million. “Penalties from commercial banks and foreign exchange bureaus was Sh420 for year ended June 2019 from Sh21 million in 2018” CBK said in the published financial statements.
Standard Chartered Kenya, Equity, Diamond Trust, Co-operative Bank and KCB Group were in September 2018 fined Penalties totalling Sh392.5 million for failing to report the suspicious transactions.
“The Act has been empowered to administer fines, penalties on institutions as well as individuals who have violated the Proceeds of Crime and Anti-Money Laundering Act,” the regulator added seperately.
Senior government officials and dozens of business people were charged in May 2018 with various crimes related to the theft of billions of shillings from the NYS. Banks were found guilty of failing to report large transactions and not undertaking proper due diligence on customers while approving large transactions, further, the banks did did not question the documents that were provided by the thieves.
The banks had received a total of more than Sh3 billion from the NYS on behalf of their customers according to the CBK.
The Director of Public Prosecution (DPP) opted to fine the five banks instead of prosecution with an effort to improve their practices.
“Prosecution is not necessarily the only solution to the problems we are faced with, especially when it comes to the issue of graft and money laundering,” he said.
“The banks had failed to report suspicious transactions. They were not part and parcel of the corruption crime or the graft crime itself.”
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