We raised the alarm over NYS scam, says Central Bank chief

The Central Bank of Kenya governor Patrick Njoroge. PHOTO | FILE
The Central Bank of Kenya governor Patrick Njoroge. PHOTO | FILE 

The Central Bank of Kenya (CBK) has defended itself against accusations of complicity in the theft of funds from the National Youth Service (NYS), saying that it flagged the theft and that all approvals for payment came from the Ministry of Devolution and the Treasury.

CBK governor Patrick Njoroge Tuesday said that the financial sector regulator has no approval or oversight authority over government payments to contractors through the government’s Integrated Financial Management Information System (Ifmis), but instead acts on instructions relayed through its Internet banking (IB) platform to pay.

The CBK has been on the spotlight in recent days over the role its staff may have played in facilitating the payment of NYS cash to fraudulent recipients.

Last week, the director of public prosecutions (DPP) Keriako Tobiko asked the Directorate of Criminal Investigations to probe whether CBK staff facilitated the scam if no inquiry has been done yet.

The governor, however, came out fighting Tuesday, placing the blame for any wrongdoing on the doorstep of the Treasury and the Ministry of Devolution. He said that the CBK would not interfere with any of the investigations that are going on in the matter.


“CBK is the one that flagged this issue very early on, on May 28, 2015. We transferred money to one of the commercial banks through IB, and the bank queried the payment. We then wrote to Treasury and asked the question. CBK did what it should have done by requesting further clarification from the Treasury and copied in the Ministry of Devolution,” said Dr Njoroge.

“When we get data as we did that there are some concerns about some payments, we then ramp up targeted inspections on each of the institutions — which is what we have done with several banks.”

More than 30 banks have been named as having handled the NYS cash, while the Financial Reporting Centre (FRC) estimates that up to 15 banks did flag suspicious transactions related to the NYS scam.

According to the Auditor General’s report on the matter, at least Sh1.6 billion was lost through the manipulation of Ifmis, outright forgery and neglect of duty.

Dr Njoroge said: “The funding of the accounts held by various government departments and ministries comes from the government through exchequer issues.  The Treasury sends instructions to CBK with the authority of the controller of budget to debit the exchequer accounts and credit an account of the ministry.”

There are audit trails, he said, “which show the identity of the persons who approve the payments. There are three approvers from the paying ministry for Ifmis and two for IB, and their identity cannot be erased.”