Five local banks will pay a total of Ksh.385 million as penalties for their respective violation of the various provisions of anti-money laundering laws in the second National Youth Service II scandal.
This is after the Director of Public Prosecutions (ODPP) and the Directorate of Criminal Investigations (DCI) reached a deferred prosecution agreement (DPA) with the five banks on the handling of proceeds from the NYS II scandal.
The five; Standard Chartered Bank, Equity, KCB, Cooperative Bank and the Diamond Trust Bank (DTB) were previously fined a combined Ksh.392 million by the CBK after months of investigations into the handling of the NYS II loot.
The targeted inspection in 2018 revealed the possibility of criminal culpability for the violation of AML/CFT laws in addition to administrative lapses.
Terms from the DPA agreement obligates implicated banks to commit to the review and implementation of corrective measures including the review of know your customer (KYC) compliance status and the enhancement of existing Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) monitoring systems.
Other remedies prescribed to the bankers include personally charging bank managers and executives on future breaches to anti-money laundering regulations as well as taking of action on implicated staff members, the conduct of extensive anti-money laundering training for all staff and directors.
“With the deferred prosecutions, we will be able to prosecute bank managers if they are further breaches to agreements,” noted DPP Noordin Haji.
“We have been monitoring the implementation of new measures by banks since entering the DPA with the banks last year. We are not only working with the banks but also the Central Bank of Kenya”
The DCI had previously preferred charges against banks and bank officials for the violations of the set provisions. The ODPP further found sufficient evidence against the said banks and officials but settled for prosecution alternatives on observed cooperation from the lenders.
“The banks had only failed to report suspicious transactions and were not part and parcel of the crime,” added DPP Haji.
The DCI and ODPP net on NYS II facilitators remains cast with the agencies pursuing other culpable financial institutions. The CBK has previous confirmed the participation of other banks in the handling of lesser amounts from the infamous graft probe.
According to the DPP closure to the matter remains in the pipeline with the eventuality for another DPA or a vote on prosecution of implicated banks/officials.
The five commercial banks in Thursday’s DPA were found culpable in their vetting of account opening and the monitoring of transactions as large cash deposits were made hours into the opening of accounts.
Further, the lenders were non-compliant in reporting suspect transactions with the Financial Reporting Centre (FRC).
The laxities contributed to breaches to the 2017, Proceeds of Crime and Anti-Money Laundering (Amendment) Act which prescribes fines of up to Ksh.5 million and Ksh.25 million for individuals and institutions respectively with additional penalties of Ksh.10 million a day for a maximum of 180 days.
While the ODPP did not disclose its breakdown of fines to banks but for the already reported Ksh.100 million fine paid by Standard Chartered, the lender had incurred fines totalling to Ksh.77.5 million from the CBK on handling the majority of corruption proceeds totalling to Ksh.1.6 billion.
Meanwhile Equity and KCB had incurred fines amounting to Ksh.89.5 and Ksh.149.5 million for handling Ksh.886 and Ksh.639 million respectively.
Co-op Bank meanwhile incurred fines totalling to Ksh.20 million for handling Ksh.263 million worth of ill-gotten proceeds with DTB paying Ksh.56 million on the handling of Ksh.162 million