Detectives to question Deloitte, CBK officials on bank fraud


Mr Ndegwa Muhoro, the Directorate of Criminal Investigations boss. PHOTO | FILE

Audit firm Deloitte was Monday drawn into the ongoing huntdown of individuals and entities suspected to be responsible for the turmoil at Chase Bank and National Bank.

Ndegwa Muhoro, the Directorate of Criminal Investigations boss, said Deloitte — which is the external auditor of the troubled banks — had been included on the list of those under investigation and will be required to record a statement.

Mr Muhoro said Deloitte and Central Bank of Kenya’s (CBK) inspection department officials, have been included in the list of those under investigation for aiding or abetting the massive fraud and theft that is alleged to have taken place in banks.

“The team will also grill the firms that audited the banks in question and officers from the Central Bank of Kenya’s supervisory department,” Mr Muhoro said, meaning the CBK itself has not been spared the scrutiny.

Deloitte, however, said it was confident of executing its professional responsibilities and in compliance with existing rules and standards that define its mandate.

“Deloitte remains committed to the highest standards of audit quality. We stand by the quality of our work and will continue to meet our obligations as auditors. We are also confident in the sufficiency and completeness of audit procedures and quality reviews, and the effect those procedures and the resulting outcome may have had on our audit opinions,” Sammy Onyango, the CEO, Deloitte East Africa, said.

Mr Muhoro made the revelation of Deloitte’s inclusion in the investigations shortly after DCI detectives questioned and recorded statements from three suspended National Bank officials, including chief executive Munir Ahmed, Chris Kisire (chief finance officer) and George Jaba (chief credit officer).

Police said the three suspended officials, who were questioned alongside the acting chief finance officer, Wyclife Kivunira, recorded statements on the sudden upsurge in bad loans at the bank. 

READ: National Bank names 5 new senior executives

The officials were questioned two days after former Chase Bank chairman Zafrullah Khan and ousted group CEO Dancan Kabui recorded statements over last Thursday’s collapse of the bank with nearly Sh100 billion depositor funds.

The bank’s 1,400 employees were also affected by the CBK’s decision to place Chase Bank in receivership in the wake of panic withdrawals arising from suspected fraudulent dealings involving the bank’s directors and senior managers.

Chase Bank is the third bank — after Dubai Bank and Imperial Bank — to fall in nine months, mainly because of the failure of corporate governance and rampant fraud executed with the help of auditors and central bank staff.

The CBK on Thursday placed Chase Bank in receivership for 12 months following a Wednesday stampede by depositors responding to social media information that the bank was standing on shaky ground.

Chase Bank, ranked 11th among Kenya’s 42 lenders, failed to meet its market obligations, including executing client instructions for payments, prompting the regulator to place it in receivership.

Chase Bank went down after the public withdrew Sh8 billion in one day following leaked reports that auditors had discovered problems with its accounting.

READ: Chase Bank shocks market with Sh8bn secret insider loans

The bank restated its financial results on the same day its chairman and chief executive left in a huff, adding to the public impression that something had gone terribly wrong.

The restated results showed auditors had expressed concern over a whopping Sh16.6 billion mountain of insider loans said to have been disbursed to directors, employees and companies associated with them.

The developments at Chase Bank particularly caught the eye of both regulators and depositors because Imperial Bank, another mid-tier bank, is still in receivership after the CBK took over its management last October, just two months after Dubai Bank suffered sudden death.

CBK governor Patrick Njoroge on Sunday moved to calm nerves in the banking sector and announced that the regulator was establishing a special fund to support any bank or microfinance institution that is facing liquidity problems through no fault of its own.

“We will avail this facility for as long as is necessary,” Dr Njoroge said at a news conference of the bailout plan that was to be rolled out beginning yesterday.

The governor, who has introduced more stringent reporting requirements for banks since he assumed the powerful office in June, last week said there were no “systemic problems” in the sector to warrant a panic — a cautionary statement that depositors appeared not have believed.