Banks have termed firms dealing with the Kenya government as high risk and have been managing their accounts with more scrutiny.
This follows the National Youth Service Scandal that saw five major banks caught up in the Central Bank’s Sh392.5 million penalty for handling proceeds of one of the biggest scams in government.
KCB Bank was penalized the highest at Sh149.5 million, followed by Equity Bank at Sh89.5 million while Standard Chartered Bank was fined at Sh77.5 million. DTB and Cooperative Bank were fined Sh56 million and Sh20 million respectively.
CBK said the fines were based on the lenders’ failure to report large cash transactions, failure of 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, that would have been a red light to the relevant investigating authorities.
Despite the banks increased vetting on account opening as well as monitoring of transactions by firms contracted by the Government, the Central Bank felt the lenders had not done enough to stop the looting and lapses in their systems.
“CBK has reviewed each bank’s response to the penalty assessment and has concluded that the submissions were not sufficient to alter the findings of the investigations and the penalties assessed. Consequently, CBK has levied the penalties as assessed,” said Governor Patrick Njoroge.
It was reported that some of the companies under investigation opened accounts a few hours before the NYS money was credited to their accounts. The banks, which have a duty to report large transactions, CBK said, failed in their mandate by not reporting transactions that exceeded Kshs. 1 million to the Financial Reporting Centre.
“One of our biggest risks right now is government transactions so we have made improvements on an action plan and we are working with the CBK to ensure the processes are followed,” said KCB Group Chief Executive Joshua Oigara
According to Kenya Bankers Association Chief Executive Habil Olaka in a previous interview, what is critical is that banks should be more vigilant in compliance with various laws, regulations and prudential guidelines.