Equity, StanChart top list of NYS fraud fine

Equity Bank #ticker:EQTY paid the biggest fine to Director of Public Prosecutions (DPP) Noordin Haji to avoid being prosecuted for failing to report suspicious transactions linked with the theft of funds at the National Youth Service (NYS).

Equity Bank paid Sh120 million while Standard Chartered Kenya, Diamond Trust, KCB Group, and Co-operative Bank paid Sh100 million, Sh80 million, Sh60 million and Sh25 million respectively.

The chief prosecutor said the five commercial banks must pay the fines totalling Sh385 million to defer prosecution of the lenders and their executives for violating anti-money laundering laws, adding that his office reserved the right to prosecute them in future.

The charges related to the theft of billions of shillings from the NYS via fictitious supplies, which has seen dozens of senior government officials and business people charged in May 2018 with various crimes.

“The said amounts were paid into the Prosecutions Fund Account and will be restituted to the public following the existing laws and procedures,” said Mr Haji. He told a Press briefing that further investigations had found that the lenders had failed to put in place adequate systems to combat money laundering and failed to know their customers as the law required.

The chief executives of the five lenders, who flanked Mr Haji as he addressed the news conference, declined to comment.

In 2018, the Central Bank of Kenya (CBK) had fined the five banks Sh392.5 million for failing to report suspicious transactions linked to the NYS scam.

KCB was fined by the banking sector regulator Sh149.5 million for handling Sh639 million from the NYS suspects, with the fine amounting to 23.3 percent of the illicit cash.

Equity was ordered to pay Sh89.5 million for its role in aiding the transfer of Sh886 million, with the penalty representing 10.1 percent of the NYS inflows.

StanChart paid Sh77.5 million despite receiving the largest sum of Sh1.6 billion. DTB was fined Sh56 million or 34.5 percent of the Sh162 million it received, with the lender having the largest disgorgement rate among the five institutions.

Co-op Bank paid the smallest fine of Sh20 million, representing 7.6 percent of the Sh263 million NYS deposits it received.

Under the DPP deal, the banks will be required to implement various anti-money laundering measures, which include taking disciplinary action against all staff members who were involved or implicated in the scandal.

The lenders also risk prosecution should they demand reimbursements from insurance firms to cover the fines slapped by the office of DPP and CBK.

The five banks will be compelled to provide information that would help State agencies nab persons suspected to have siphoned cash from the NYS.