The National Assembly’s Public Accounts Committee (PAC) has ordered fresh investigations into Dr Njoroge’s role.
The committee wants the CBK governor investigated for failing to prevent movement of stolen funds through the banking system.
The PAC also wants the EACC and the DCI to conduct a thorough lifestyle audit of former Devolution secretary Anne Waiguru.
The PAC accuses the banking sector regulator of flouting sections 44(1) (e), 44(1) and (2) of the CBK Act.
The Gumbo committee holds that the CBK failed to take ownership of its responsibility as the paying bank to ensure that it safeguards public funds.
Central Bank of Kenya (CBK) Governor Patrick Njoroge risks becoming one of the major casualties of the multi-billion shilling National Youth Service (NYS) scam after Parliament recommended that he be investigated and charged with abuse of office for abetting theft of public funds.
The National Assembly’s Public Accounts Committee (PAC), in its report on the special audit of NYS accounts, has ordered fresh investigations into Dr Njoroge’s role in the scam estimated to have cost the taxpayers more than Sh10 billion.
The committee wants the CBK governor investigated for failing to prevent movement of stolen funds through the banking system and to ascertain whether he should be charged with abuse of office for 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 says in a report that was tabled in Parliament last evening.
“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.”
The PAC also wants the Ethics and Anti-Corruption Commission (EACC) and the Directorate of Criminal Investigations (DCI) to conduct a thorough lifestyle audit of former Devolution secretary Anne Waiguru as well as former top ministry and NYS officials.
The committee investigated the NYS transaction following a special audit by Auditor-General Edward Ouko, which concluded that over Sh1.8 billion may have been lost.
The audit was ordered following revelations that Sh791 million had been stolen from NYS accounts.
The damning report, which was tabled in the House by PAC chairman Nicholas Gumbo, says that up to Sh10 billion may have been lost at the NYS alone.
This means that out of the Sh25 billion allocated to the NYS in the 2013/14 financial year only Sh15 billion may have been spent lawfully.
The PAC accuses the banking sector regulator of flouting sections 44(1) (e), 44(1) and (2) of the CBK Act, which among other things stipulates that the CBK shall act as a fiscal agent of and banker of the government.
“The bank may also perform the functions of fiscal agent and banker of any other public entity in accordance with, and within the scope determined by any special arrangements between the bank and the public entity concerned,” Section 44(2) of the Act states.
The PAC notes that payments are initiated at the relevant ministries in accordance with the contracts in place with suppliers and after verification of the supplier, deliveries and invoicing, the relevant ministry then approves the payment through the IFMIS for processing by the CBK through Swift Advises to commercial banks.
“Based on the said process, the committee finds that three parties, namely ministries, the CBK and respective commercial bank/financial institutions each had an equal obligation to safeguard the public against loss of funds,” the PAC says.
The report says Section 44 of the Proceeds of Crime and Anti-Money Laundering Act details the procedure a reporting institution must follow in processing such funds.
“The CBK failed to do so, the banking and bank supervision departments and the Financial Reporting Centre of the CBK failed to confirm the authenticity of payments to the commercial banks and other financial institutions before releasing the funds,” the committee found.
The PAC says the CBK, as the remitting bank under the real-time gross settlement (RTGS), is required to obtain supporting documentation for large and unusual transactions, ensure transactions have the relevant approval signatures and confirm all documents supporting payments such as invoices are obtained and all approvals given and appended on the paying instructions.
“In this respect, the CBK would be expected to obtain appropriate documentation as to the identity of the recipient (or sender) of the transferred or paid funds and the reason underlying the transfer or payment for large, frequent or unusual transfers or payments of from the bank,” says the report.
The Gumbo committee holds that the CBK failed to take ownership of its responsibility as the paying bank to ensure that it safeguards public funds and comply with anti-money laundering laws.
National Assembly’s Public Accounts Committee chairman Nicholas Gumbo (centre) speaks at a Press briefing on the NYS scandal last November. FILE PHOTO | NMG
“The CBK, in this instance, was the first point of entry of public funds into the banking ecosystem and ought to have ensured such funds were not proceeds of crime, money laundering and or corruption,” the committee says, adding that the CBK was culpable of abbeting and aiding money laundering.
“In particular, the CBK governor is culpable of failure to advise the government on the irregular payment requisition that were being received from the Ministry of Devolution as per the CBK Act,” the PAC says.
The list of individuals recommended for investigation and prosecution includes former NYS deputy director-general Adan Harakhe, companies associated with the NYS scam linchpin Josephine Kabura, a company owned by political consultant Mutahi Ngunyi, MM Gitonga Advocates, Ogola and Mujera and Sing’oei, Murkomen and Sigei Advocates.
