The Central Bank of Kenya has fined five top banks millions for their role in handling more than $35 million stolen from the National Youth Service (NYS) funds.
The banking regulator said Wednesday that it had concluded its first phase of investigations of the banks that were used by persons suspected of transacting illegally with the NYS.
“The investigations prioritised banks that handled the largest flows, namely; Standard Chartered Bank Kenya Ltd, Equity Bank Kenya Ltd, KCB Bank Kenya Ltd, Co-operative Bank of Kenya Ltd, and Diamond Trust Bank Kenya Ltd,” said CBK in a statement.
The lenders were found to have violated the anti-money laundering and combating financing of terrorism laws and regulations by failing to report large cash transactions, failure to undertake adequate customer due diligence, lack of supporting documentation for large transactions, and lapses in reporting of suspicious transaction reports to the Financial Reporting Centre.
Each of the five banks has been penalised based on the extent of violations, which will see KCB Group pay the largest fine of Ksh149.5 million ($1.5 million). Equity has been fined Ksh89.5 million ($895,000), StanChart will pay Ksh77.5 million ($775,000), DTB Ksh56 million ($560,000) and Co-op Bank Ksh20 million ($200,000).
CBK said the second phase of the investigations will involve the use of its findings by other investigative agencies with the Directorate of Criminal Investigations and the Office of the Director of Public Prosecution assessing criminal culpability.
StanChart was found to have handled the largest amount of the NYS funds, Ksh1.628 billion ($16.3 million), followed by Equity Ksh886 million ($8.86 million), KCB Ksh639 million ($6.39 million), Co-operative Ksh263 million ($2.63 million) and DTB Ksh162 million ($1.62 million).
An additional set of banks will also be identified and investigated, the regulator added.
The NYS is a paramilitary training institution that has been at the forefront of the government’s plan to combat high youth unemployment.
Enrolment is voluntary, and sees youths receive a stipend while receiving technical training and working on government projects.
With a budget soaring to some $250 million a year, the NYS has been plagued by Kenya’s endemic corruption, with a first scandal breaking in 2015 after the theft of $7 million through inflated pricing and fictitious payments.
The latest scandal involving $90 million was brought to light by suppliers who had not been paid.