CBK governor Patrick Njoroge said regulatory guidelines on handling the proceeds of corruption are clear to all financial institutions, making chief executive officers of those that flouted the rules personally liable.
Some of the NYS officials suspected to have engineered the multi-billion shilling scandal were arraigned in court Tuesday.
The law requires all financial institutions including banks, insurance companies and Saccos to file with the Financial Reporting Centre (FRC) daily reports on transactions above Sh1 million and those deemed suspect.
Commercial banks that were used to process and ship out billions of shillings from the National Youth Service (NYS) must prepare for serious consequences, the Central Bank of Kenya said Tuesday.
“We required that the CEOs declare under oath that they understand and are compliant with those things. There cannot be any excuse that a CEO or the board (of a bank) does not understand the requirement of AML/CFT or the various other guidelines that are there,” Dr Njoroge said, adding that the banking regulator, along with the Director of Criminal Investigations (DCI) had launched investigations into the activities of unnamed banks.
Several banks have been accused of neglecting their obligation to report suspect cash transactions.
“The issue for sure is not guidelines or lack thereof. The guidelines are there. It is an issue of people not following the guidelines deliberately. How else could you make a mistake on things that you are completely aware of?” Dr Njoroge asked.
The law requires all financial institutions including banks, insurance companies and Saccos to file with the Financial Reporting Centre (FRC) daily reports on transactions above Sh1 million and those deemed suspect.
Bank executives and persons who are convicted for handling illicit cash face a Sh1 million fine and a three-year jail term, while institutions including banks, credit unions facilitating such deals could be fined upto Sh20 million upon conviction. Banks could also lose their licences.
Dr Njoroge said the CBK aims to recover all money paid out fraudulently, but added that all banks and other entities involved in the fraudulent transactions will be held accountable.
“Some of the resources have been frozen,” said Dr Njoroge.
“At the end of the day all those who are complicit in this will be held accountable, there is no doubt in my mind.”
Preliminary findings in the Sh9 billion fraud claims at the youth agency show that multiple payments running into tens of millions of shillings were authorised from the Integrated Financial Management Information System (IFMIS) to the involved companies’ accounts at intervals, releasing the whole amount in less than an hour after it was asked for.
This raises the red flag on whether commercial banks involved reported any suspicious transactions to the CBK.
“These investigations are in high gear,” said Dr Njoroge. “The CBK is working closely with Director of Criminal Investigations and other investigating agencies on this case. We are really embedded in that investigative environment.”
