@BusinessDaily

Banking sector regulators on the spot over NYS dirty cash

3 months ago, 27 Maý 10:19

By: Brian Ngugi

The Central Bank of Kenya (CBK) and the State anti-dirty cash watchdog, the Financial Reporting Centre, are  in a tight spot yet again as details of the multi-billion scandal at the National Youth Service continue to emerge.

Preliminary findings in the Sh9 billion fraud claims at the youth agency, according to police accounts, 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 and the FRC, and if so, what regulatory action the two agencies took to stem the payments. 

CBK Governor Patrick Njoroge through his office and the head of the FRC Saitoti Kimerei Maika had not responded to our inquiries on the matter by the time we went to press.

The pair is, however, expected to shed light on any breach of regulatory oversight when they  face the parliamentary watchdog committee in coming days over their agencies’ role in failing to prevent the alleged multibillion shilling fraudulent payments by NYS.

“We shall summon all of them in addition to any other person or authority we feel has useful information for the committee’s ongoing inquiry,” parliamentary Public Accounts Committee (PAC) chairman Opiyo Wandayi said on Friday.

The Proceeds of Crime and Anti-Money Laundering Act (2009) empowers FRC to receive, analyse and interpret reports of usual or suspicious transactions in Kenya’s banking system.

Analysts, however, say while laws and regulations which require banks to conduct checks to detect the proceeds of graft are in place, many lenders are flouting them with no consequences.

In any case, the Sh20 million fine, they say, is peanuts to major players.

ALSO SEE:

“Many banks will not take rules designed to prevent corruption and other crimes seriously. Corrupt officials will continue to plunder state assets, tax cheats will carry on evading their taxes, and other serious criminals will continue committing their crimes, knowing that they can use banks to get away with it,” said damning findings of a 2015 global report by campaign group, Global Witness titled Banks and Dirty Money.

The report stated that banks look the other way, leaving the door wide open for corrupt individuals to launder funds.

It added that since the prospect of rogue bankers going to jail for banking malpractices in Kenya has for a long time remained a mirage, there are adequate incentives for lenders at the institutional level to deal with “dirty corruption money on a large scale”.

Economist Robert Shaw said the regulator needs to ensure banks comply with existing regulations without hiding under the customer confidentiality obligations.

Mr Shaw said the key issue is compliance, adding that the buck stops with both lenders and regulators. Enforcement of existing laws, he said, would stop banks from acting as corruption conduits.

“The CBK monitoring process has not been as strong as it should be. It should be ...
Read More


Category: business news markets lifestyle opinion economy corporate

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@BusinessDaily

Banking sector regulators on the spot over NYS dirty cash

3 months ago, 27 Maý 10:19

By: Brian Ngugi

The Central Bank of Kenya (CBK) and the State anti-dirty cash watchdog, the Financial Reporting Centre, are  in a tight spot yet again as details of the multi-billion scandal at the National Youth Service continue to emerge.

Preliminary findings in the Sh9 billion fraud claims at the youth agency, according to police accounts, 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 and the FRC, and if so, what regulatory action the two agencies took to stem the payments. 

CBK Governor Patrick Njoroge through his office and the head of the FRC Saitoti Kimerei Maika had not responded to our inquiries on the matter by the time we went to press.

The pair is, however, expected to shed light on any breach of regulatory oversight when they  face the parliamentary watchdog committee in coming days over their agencies’ role in failing to prevent the alleged multibillion shilling fraudulent payments by NYS.

“We shall summon all of them in addition to any other person or authority we feel has useful information for the committee’s ongoing inquiry,” parliamentary Public Accounts Committee (PAC) chairman Opiyo Wandayi said on Friday.

The Proceeds of Crime and Anti-Money Laundering Act (2009) empowers FRC to receive, analyse and interpret reports of usual or suspicious transactions in Kenya’s banking system.

Analysts, however, say while laws and regulations which require banks to conduct checks to detect the proceeds of graft are in place, many lenders are flouting them with no consequences.

In any case, the Sh20 million fine, they say, is peanuts to major players.

ALSO SEE:

“Many banks will not take rules designed to prevent corruption and other crimes seriously. Corrupt officials will continue to plunder state assets, tax cheats will carry on evading their taxes, and other serious criminals will continue committing their crimes, knowing that they can use banks to get away with it,” said damning findings of a 2015 global report by campaign group, Global Witness titled Banks and Dirty Money.

The report stated that banks look the other way, leaving the door wide open for corrupt individuals to launder funds.

It added that since the prospect of rogue bankers going to jail for banking malpractices in Kenya has for a long time remained a mirage, there are adequate incentives for lenders at the institutional level to deal with “dirty corruption money on a large scale”.

Economist Robert Shaw said the regulator needs to ensure banks comply with existing regulations without hiding under the customer confidentiality obligations.

Mr Shaw said the key issue is compliance, adding that the buck stops with both lenders and regulators. Enforcement of existing laws, he said, would stop banks from acting as corruption conduits.

“The CBK monitoring process has not been as strong as it should be. It should be ...
Read More

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