CBK warns banks of stiff sanctions if found aiding graft


Central Bank of Kenya (CBK) Governor Patrick Njoroge. FILE PHOTO | NMG

Commercial banks found to be handling graft proceeds will face stiff sanctions, Central Bank of Kenya (CBK) Governor Patrick Njoroge warned on Thursday.

Dr Njoroge, who addressed bankers at a banking forum organized by sector lobby Kenya Bankers Association (KBA) in Nairobi, said that the regulator is ready to crack the whip again on any rogue bank which helps ship out money from public institutions illegally obtained from graft.

“Two weeks ago we informed the Kenyan people of the action we took against some your institutions because of non-compliance with integrity laws. Make no mistake, it was not easy, we considered all the possible negative outcomes from those actions,” said Dr Njoroge at the 7th Annual Research Conference by the KBA.

“But we will not hesitate to do it again in under similar circumstances. Banks must steer away from being used conduits for of ill-gotten funds,” he added.

He said local bank heads owe a duty of care to the public not to abet or aid graft in public institutions.

“The Kenyan people including “Wanjiku” (ordinary Kenyan) demand that, from all of us, and will take us very unkindly if we look the other way,” Dr Njoroge said.

Mid this month the CBK fined five commercial banks a total of Sh392.5 million in connection with the theft of funds at the National Youth Service (NYS).

Those penalised are KCB Group #ticker:KCB (Sh149.5 million), Equity Bank #ticker:EQTY (Sh89.5 million), Standard Chartered Bank-Kenya #ticker:SCBK (ShSh77.5 million), Diamond Trust Bank #ticker:DTK (Sh56 million) and Co-operative Bank of Kenya #ticker:COOP (Sh20 million).

A day later, the Director of Public Prosecutions (DPP) Noordin Haji said that implicated chief executives and employees of the banks who helped ship out billions of shillings from the NYS will be arrested and prosecuted. 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 up to Sh20 million upon conviction. Banks could also lose their licences.

The two day KBA event, themed “Credit Market Dynamics in an Evolving Regulatory and Market Participants’ Environment”, has brought together banking experts and stakeholders to assess ways in which the financial system can “promote efficient credit allocation to the economy.”

“This forum brings together a rich mix of thought leaders from both the public and private sectors to explore challenges in the financial sector with a view to explore what works and what doesn’t,” said KBA CEO Habil Olaka.