Mystery of Imperial Bank savers who have defied calls to collect their cash

The mystery surrounding Imperial Bank’s collapse has deepened in recent weeks with the failure by thousands of depositors to claim their cash from the bank.

Central Bank of Kenya (CBK) governor Patrick Njoroge yesterday told Parliament that only a third or 16,955 depositors have lodged claims and got paid their savings worth Sh6.4 billion since the exercise began two months ago – casting doubts on the authenticity of Imperial Bank’s deposit accounts.

READ: 10,000 Imperial Bank depositors claim their cash

The CBK said it had set aside Sh8 billion to settle all claims of Sh1 million and below, meaning some Sh1.6 billion remains unclaimed.

Dr Njoroge said forensic auditors were combing the bank’s accounts with a fine tooth pick to establish the cause of the low turnout.

“We are doing a detailed examination of deposits and loans. There are concerns of possible money laundering,” Dr Njoroge told members of the National Assembly’s Finance, Planning and Trade Committee.

“Investigations are ongoing and I don’t want to comment on that,” he said.

Imperial Bank records show that it had 44,364 account holders with less than Sh1 million who qualified to lodge claims for full access to their cash.

Imperial Bank had a total of 49,942 deposit accounts, meaning 5,578 were considered large account holders who qualified for a maximum of Sh1 million from their deposits.

The CBK had planned to spend about Sh8 billion to settle all claims of up to Sh1 million by last Christmas. Imperial had 28 branches in Kenya.

Dr Njoroge said the CBK was, among other things, interrogating Imperial Bank compliance with the Know Your Customer (KYC) procedures during its opening of the accounts and whether all loans are backed by security.

The low turnout of savers echoes a similar experience the CBK had at scandal-hit Dubai Bank where only 561 out of the 7,700 depositors lodged claims after the CBK offered to pay all deposits below Sh100,000.

The banking sector regulator, through KCB and DTB banks, on December 11, 2015 began paying small depositors at Imperial Bank all their dues.

The CBK planned to have paid out the small account holders by end of March, the governor said, but the effort was being undermined by the low rate at which depositors are making claims.

Kisumu Town East MP Shakeel Shabbir said Imperial Bank directors were well aware of parallel banking activities in the lender, commonly referred to as ‘chopdi accounts.’

The lawmaker further alleged that the directors were aware of massive money laundering at Imperial Bank through an entity known as W.E. Tilley (Muthaiga) – which also featured in the closure of Charterhouse Bank.

“The bank’s directors were all aware of these and were part of it. Falsifying books of account is a criminal offence,” said Mr Shabbir.

W.E. Tilley (Muthaiga) has admitted to receiving Sh10 billion from Imperial Bank and has expressed readiness to return the loot, according to court documents.

The CBK closed Imperial Bank on October 13, 2015, citing “unsafe and unsound business conditions to transact business” at the mid-tier lender that had Sh58 billion in customer deposits.

The closure happened on the day Imperial Bank was to list a Sh2 billion bond – approved by the Capital Markets Authority - at a fixed rate of 15 per cent on the Nairobi bourse.

Dr Njoroge was hard-pressed to explain how the regulator was unable to detect the irregular practices at Imperial Bank and the possible collusion between CBK staff and the fraudsters.

The governor told the National Assembly that there’s an ongoing forensic audit by Washington D.C-based FTI Consulting whose outcome would see action taken against all conspirators, including banking supervision staff.

“Whoever perpetrated this will be held accountable. Some of our staff were complicit. I have made it clear that they will be held to account and nobody will be spared,” he told MPs.

“Our currency is credibility,” a tough-talking Dr Njoroge told the House committee.

To forestall the possibility of another case of parallel banking and cooking books, Dr Njoroge said that beginning this year, auditors will be required to look into banks’ IT systems.

“We have asked all auditors in the 2016 audit cycle to interrogate the IT system. Previously, we never interrogated the IT system,” said the governor who took up the reins on June 19, 2015.

The CBK reckons that software manipulation was used to siphon about Sh34 billion from Imperial Bank.

Imperial Bank’s long-serving group managing director Abdulmalek Janmohamed fraudulently transferred a total of Sh34 billion from depositors’ cash to his entities and bank accounts between 2002 to September 15, 2015 when he died, according to court filings.

On efforts to revive Imperial Bank, Dr Njoroge told the National Assembly that the owners were yet to present an actionable plan to jump-start the collapsed lender.

“The plan must be credible. We should not be in the business of opening banks for a temporary period of time,” he said, rubbishing proposals floated by shareholders. Shareholders have indicated willingness to inject Sh10 billion capital into the bank to be complemented by conversion of depositors’ savings into shares.

“They (shareholders) cannot pass on responsibility to depositors. There must be appropriate burden sharing, which rests with directors and shareholders,” said Dr Njoroge. Imperial Bank had Sh87 billion in deposits at the time of collapse, but its managers had suppressed Sh39 billion in bank’s balance sheet.

Dr Njoroge said Imperial Bank directors were responsible for preparation of books of accounts and their accuracy as provided for under the law.