The banks were fined a total of $3.89 million for failure to report large cash transactions; failure to undertake adequate customer due diligence; lack of supporting documentation for large transactions; and lapses in the reporting of Suspicious Transaction Reports to the Financial Reporting Centre.
Senior government officials were arrested in May for swindling NYS $99 million through fraudulent means, and reportedly used the banks to channel the illicit funds.
Among those arrested was the youth affairs Principal Secretary, Lilian Omollo, NYS Director-General Richard Ndubai and managers of suspected phony companies.
The funds were allegedly lost through fictitious invoices, and multiple payments on one supplier invoice, at the NYS.
The banks fined include Standard Chartered Bank ($763,000), Equity Group ($882,000), KCB Group ($1.4), Co-operative Bank ($198,000), and Diamond Trust Bank ($554,000).
The main objective of the investigations was to examine the operations of the NYS-related bank accounts and transactions, and in each instance assess the bank’s failure to comply with the requirements of Kenya’s Anti-Money Laundering/Combating Financing of Terrorism (AML/CFT) laws and regulations.
“CBK has assessed monetary penalties for each of the five banks in accordance with the extent of the violations that were identified and pursuant to CBK’s powers under the Banking Act and the Central Bank of Kenya Act,” the regulator said in a statement issued in Nairobi.
CBK said it took the stern action in order to safeguard stakeholders’ interests and maintaining a healthy financial sector.
The regulator said that the second phase of the investigations will involve use of these findings by other investigators, “inter alia, assessment of criminal culpability by the Directorate of Criminal Investigations (DCI) and the Office of the Director of Public Prosecution (ODPP).”