Regulator flags inactive CDS accounts to curb fraudulent deals in bills, bonds
The Central Bank of Kenya. Photo/FILE
What you need to know:
CBK said that the measure was a routine affair although it comes on the back of allegations that Treasury scripts irregularly found their way to the market in 2011 and 2012.
There have been several fraud cases in the past involving CDS accounts for both bonds and equities.
The Central Bank of Kenya is flagging dormant central depository accounts for Treasury bill and bonds to forestall chances of fraud.
The regulator said that the measure was a routine affair although it comes on the back of allegations that Treasury scripts irregularly found their way to the market in 2011 and 2012.
“Some frauds may be perpetuated through inactive accounts. So we are guarding against this risk. Central Bank has not discovered any fraudulent activity through inactive CDS accounts,” said the CBK’s communications unit.
However, there have been several fraud cases in the past involving CDS accounts for both bonds and equities.
In 2012 Moses Muregi, a CBK employee, was charged in court with fraudulently creating bonds for sale to investors. The employee was accused of taking advantage of weaknesses in the CBK ICT system to create the fake bonds amounting to Sh105 million.
Mr Muregi was charged alongside stock agent firm Tsavo Securities employee Bokole Mweni and a director of Manline Communications, which was accused of being involved in the sale of the bonds.
The case was also related to another in which Tsavo Securities managing director Fred Mweni was banned by the Capital Markets Authority (CMA) for 15 years from being involved directly in the stock market.
He had been accused of being party to the fraud relating to three bonds worth Sh18.5 million, Sh9.5 million and Sh11.5 million. Mr Mweni has challenged the CMA ban.
In the equities market, an employee of the Central Depository System Corporation (CDSC) was taken to court in 2011 on the accusation of penetrating the system and selling shares in dormant accounts.
In September 2012 NIC Securities sued Genghis Capital and the CDSC for allegedly allowing fraudulent sale of its clients’ shares valued at more than Sh10 million.
The commercial bank accused the CDSC of allowing unauthorised workers access to information and materials that paved the way for the alleged fraud.
