Kenyan Prosecutor Weighing Graft Charges Against Five Banks

NAIROBI (Capital Markets in Africa) – Kenya’s state prosecutor is considering a police recommendation that five of the country’s biggest banks be prosecuted over corruption-related charges.

It’s the latest sign that the authorities are intensifying their fight against graft that President Uhuru Kenyatta has called a threat to national security. Kenya ranks among the world’s 40 most-corrupt countries.

Kenya’s Director of Criminal Investigations recommended the domestic lenders be charged for “concealing and facilitating, aiding, abetting and benefiting from the proceeds of crime,” Director of Public Prosecutions Noordin Haji said on Thursday. The banks are Standard Chartered Bank Ltd., Equity Group Holdings Plc, KCB Group Ltd., Co-operative Bank of Kenya Ltd. and Diamond Trust Bank Ltd.

“I have constituted a team of senior prosecutors to independently review the respective investigation files and make recommendations in 14 days,” Haji said in the statement emailed from the capital, Nairobi.

Haji’s office said the charges relate to a scandal at the National Youth Service, a state-run youth-training organization, in which 8 billion shillings ($80 million) of public funds went missing. The central bank in September fined the banks after a probe showed they handled money illegally acquired from the NYS.

StanChart, Equity
The police investigation found:

• Standard Chartered received as much as 1.63 billion shillings between January 2016 and April 2018, of which more than 588.6 million shilling was suspiciously transacted by bank officials and no report was made to the Financial Reporting Center, as required under the Proceeds of Crime and Anti-Money Laundering Act
• Equity’s Kenyan unit handled 886.4 million shillings, of which more than 264 million shillings and $58,000 were suspiciously transacted by bank officials
• KCB’s Kenyan unit received 800 million shillings, of which more than 148 million shillings was transacted by its officials
• Co-operative and Diamond Trust handled 250 million shillings and 164 million shillings respectively

Reputational Damage
The Kenya Bankers Association, the industry lobby group, will issue a statement on the matter later on Thursday, KCB spokeswoman Judith Odhiambosaid in an emailed response to questions seeking comment. Standard Chartered, Equity, Diamond Trust and Co-operative didn’t immediately respond to requests for comment.

While the investigation presents no risk to the industry, the lenders will need to address the potential damage to their reputations, said Bernard Kiarie, regional banking head at Nairobi-based African Alliance Securities Kenya.

“For the banks to try and minimize reputation risk, they’ll deal with the individuals according to the already existing regulations,” he said.

Individuals found guilty face sentences of up to 14 years in prison, or as much as 5 million shillings under Kenyan law.

Source: Bloomberg Business News