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How five banks in Kenya cleaned dirty money

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By BRIAN WASUNA
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Kenya’s Director of Criminal Investigations George Kinoti and his counterpart at the Office of the Director of Public Prosecutions Noordin Haji are considering prosecuting 20 senior officials in five banks, which they believe aided the laundering of at least Ksh1 billion ($10 million) looted from the National Youth Service (NYS) between January 2016 and April last year.

Detectives believe senior officials at Standard Chartered, KCB, Equity, Diamond Trust and Cooperative banks quietly allowed some of the key suspects in the Ksh8 billion ($80 million) looting of the NYS to move large sums of money undetected.

Now Mr Kinoti wants Mr Haji to press charges against the banks and the 20 officials.

The DPP on Thursday announced that he had instructed a group of special prosecutors to review the evidence the DCI gathered and recommend whether to charge all or just some of them.

Mr Haji’s move is likely to shake the banking industry to the core as it could see several lenders and their officials charged in relation to one graft case.

The Central Bank of Kenya (CBK) has already fined the five lenders a total of Ksh392 million ($3.92 million) for failing to report large transactions to the industry regulator.

A source at the DCI, who is close to the probe, Thursday told the Nation that Mr Haji had embedded prosecutors within a probe team comprising officers from other agencies, including CBK and Financial Reporting Centre (FRC).

The stealth movement of Ksh1.054 billion ($10.5 million), the DCI believes, was aimed at helping looters launder the funds and make a clean getaway.

The 20 senior officials now targeted for prosecution failed to inform the CBK and FRC of any transactions involving the transfer or withdrawal of Ksh1 million ($10,000) or more, in line with the Proceeds of Crime and Anti-Money Laundering Act.

The Nation is not revealing their identities for legal reasons.

Equity Bank is the hardest hit by the investigation as the DCI wants six of its senior officials charged alongside the lender.

The DCI is also targeting five officials from Standard Chartered, four from Diamond Trust, three from KCB and two from Cooperative Bank.

The banks and their officials have been accused of breaching sections 3b(iii), 11(1) and 10(2) of the Proceeds of Crime and Anti-Money Laundering Act.

Section 3b(iii) outlaws aiding of criminals to move money or other assets that are proceeds of crime, and the offence comes with a maximum 16-year jail sentence.

Section 11(1) puts on the spot banks that fail to monitor and report large or suspicious money transactions to the CBK and FRC.

Institutions that violate this law face fines of up to Ksh2.5 million ($25,000), while individuals could be fined and thrown in jail for up to seven years.

Section 10(2) flags any individual or institution that gives false information to the CBK and FRC that could derail detection of money laundering. The crime incurs a fine of Ksh1 million ($10,000), a jail term of up to two years, or both.

Over 40 individuals and firms were last year charged with the theft of Ksh468 million ($4.68 million) from the NYS after Mr Haji indicated that prosecution will be done in batches.

The scandal caused genuine firms huge losses after their supply contracts were duplicated and used to pay dubious individuals who had not delivered any goods or services to the state agency.

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Among those charged are former Youth Principal Secretary Lilian Omollo, former NYS director-general Richard Ndubai, ex-senior deputy director Nicholas Ahere, former acting finance officer Willington Lubira, and former chief accountant Clement Murage. Several businessmen have also been charged over the scandal.

Standard Chartered received Ksh1.628 billion ($16.28m) that was paid to Firstling Supplies, Active Electrons Africa Limited, Flagstone Merchants Limited and Excella Supplies. Businessman James Thuita Nderu and his estranged wife, Ms Yvonne Wanjiku Ngugi, own the four firms.

Detectives flagged Ksh558.58 million ($5.58m) that was moved with the help of five Standard Chartered officials who did not alert CBK and FRC of the large transactions.

Cooperative Bank handled Ksh250 million ($2.5m), which went to Sambeat Investments and former Kirinyaga Woman Representative Winnie Karimi Njuguna. Our source described Ms Njuguna as “politically connected” but did not substantiate.

Of the Ksh250 million ($2.5m), detectives flagged Ksh25 million ($250,000), which should have been reported to the CBK and FRC but was not.

Payments of Ksh886.42 million ($8.86m) were also made by the State Department for Public Service and Youth Affairs on behalf of NYS to Equity Bank. The source did not disclose who the beneficiaries were, but said the lender’s officials aided the movement of Ksh264 million ($2.64m) without reporting to the relevant authorities.

Another Ksh800 million ($8m) was wired to Kunjiwa Investments, Annwaw Enterprises, Jerrycathy Enterprises, Waluco Investments and Lucy Wambui Ngirita. The four firms are owned by Ms Ngirita, her son Jeremiah, daughters Ann and Phyllis, and her daughter-in-law Catherine Mwai.

Diamond Trust Bank handled Ksh164 million ($1.64m) intended for Ms Omollo, Ms Ngugi, Advance Quick Fit and Jelly Merchants.

Detectives believe that close to Ksh28 million($280,000) of this was transacted suspiciously.

The Kenya Bankers Association Thursday said it was impressed by the seriousness with which its members had treated the NYS investigations. He promised continued collaboration with the investigating agencies.

“As signatories to the Code of Ethics for Business in Kenya, we are committed to working with the Government and other players in the fight against corruption,” the lobby said.

“While investigations of transactions undertaken by the NYS are in progress, we are pleased by the magnitude of effort with which our member banks are treating this exercise, recognising the industry implications, and look forward to a positive outcome.”

KCB Chief Executive Officer Joshua Oigara declined to comment on the matter, saying questions should be referred to the Kenya Bankers Association, “which speaks for all banks”.

Equity Bank General Manager Alex Muhia promised to respond to our questions but had not done so by the time we went to press.

In May last year, when this newspaper first revealed the identities of banks that had handled the NYS transactions, most of them declined to comment on a matter under investigation.

At the time, Diamond Trust Bank said it fulfils its prudence obligations in respect of all transactions.

Central Bank Governor Patrick Njoroge said the theft of NYS money through fake payment vouchers was aided by the banks “deliberately”.

He posed: “How else could you make a mistake on things that you are aware of?”

Last September, CBK said it was still monitoring another set of banks that could also be fined and its officials prosecuted.

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General

Sordid tale of the bank ‘that would bribe God’

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Bank of Credit and Commerce International. August 1991. [File, Standard]

“This bank would bribe God.” These words of a former employee of the disgraced Bank of Credit and Commerce International (BCCI) sum up one of the most rotten global financial institutions.
BCCI pitched itself as a top bank for the Third World, but its spectacular collapse would reveal a web of transnational corruption and a playground for dictators, drug lords and terrorists.
It was one of the largest banks cutting across 69 countries and its aftermath would cause despair to innocent depositors, including Kenyans.
BCCI, which had $20 billion (Sh2.1 trillion in today’s exchange rate) assets globally, was revealed to have lost more than its entire capital.
The bank was founded in 1972 by the crafty Pakistani banker Agha Hasan Abedi.
He was loved in his homeland for his charitable acts but would go on to break every rule known to God and man.
In 1991, the Bank of England (BoE) froze its assets, citing large-scale fraud running for several years. This would see the bank cease operations in multiple countries. The Luxembourg-based BCCI was 77 per cent owned by the Gulf Emirate of Abu Dhabi.  
BoE investigations had unearthed laundering of drugs money, terrorism financing and the bank boasted of having high-profile customers such as Panama’s former strongman Manual Noriega as customers.
The Standard, quoting “highly placed” sources reported that Abu Dhabi ruler Sheikh Zayed Sultan would act as guarantor to protect the savings of Kenyan depositors.
The bank had five branches countrywide and panic had gripped depositors on the state of their money.
Central Bank of Kenya (CBK) would then move to appoint a manager to oversee the operations of the BCCI operations in Kenya.
It sent statements assuring depositors that their money was safe.
The Standard reported that the Sheikh would be approaching the Kenyan and other regional subsidiaries of the bank to urge them to maintain operations and assure them of his personal support.
It was said that contact between CBK and Abu Dhabi was “likely.”
This came as the British Ambassador to the UAE Graham Burton implored the gulf state to help compensate Britons, and the Indian government also took similar steps.
The collapse of BCCI was, however, not expect to badly hit the Kenyan banking system. This was during the sleazy 1990s when Kenya’s banking system was badly tested. It was the era of high graft and “political banks,” where the institutions fraudulently lent to firms belonging or connected to politicians, who were sometimes also shareholders.
And even though the impact was expected to be minimal, it was projected that a significant number of depositors would transfer funds from Asian and Arab banks to other local institutions.
“Confidence in Arab banking has taken a serious knock,” the “highly placed” source told The Standard.
BCCI didn’t go down without a fight. It accused the British government of a conspiracy to bring down the Pakistani-run bank.  The Sheikh was said to be furious and would later engage in a protracted legal battle with the British.
“It looks to us like a Western plot to eliminate a successful Muslim-run Third World Bank. We know that it often acted unethically. But that is no excuse for putting it out of business, especially as the Sultan of Abu Dhabi had agreed to a restructuring plan,” said a spokesperson for British Asians.
A CBK statement signed by then-Deputy Governor Wanjohi Murithi said it was keenly monitoring affairs of the mother bank and would go to lengths to protect Kenyan depositors.
“In this respect, the CBK has sought and obtained the assurance of the branch’s management that the interests of depositors are not put at risk by the difficulties facing the parent company and that the bank will meet any withdrawal instructions by depositors in the normal course of business,” said Mr Murithi.
CBK added that it had maintained surveillance of the local branch and was satisfied with its solvency and liquidity.
This was meant to stop Kenyans from making panic withdrawals.
For instance, armed policemen would be deployed at the bank’s Nairobi branch on Koinange Street after the bank had announced it would shut its Kenyan operations.
In Britain, thousands of businesses owned by British Asians were on the verge of financial ruin following the closure of BCCI.
Their firms held almost half of the 120,000 bank accounts registered with BCCI in Britain. 
The African Development Bank was also not spared from this mess, with the bulk of its funds deposited and BCCI and stood to lose every coin.
Criminal culture
In Britain, local authorities from Scotland to the Channel Islands are said to have lost over £100 million (Sh15.2 billion in today’s exchange rate).
The biggest puzzle remained how BCCI was allowed by BoE and other monetary regulation authorities globally to reach such levels of fraudulence.
This was despite the bank being under tight watch owing to the conviction of some of its executives on narcotics laundering charges in the US.
Coast politician, the late Shariff Nassir, would claim that five primary schools in Mombasa lost nearly Sh1 million and appealed to then Education Minister George Saitoti to help recover the savings. Then BoE Governor Robin Leigh-Pemberton condemned it as so deeply immersed in fraud that rescue or recovery – at least in Britain – was out of the question.
“The culture of the bank is criminal,” he said. The bank was revealed to have targeted the Third World and had created several “institutional devices” to promote its operations in developing countries.
These included the Third World Foundation for Social and Economic Studies, a British-registered charity.
“It allowed it to cultivate high-level contacts among international statesmen,” reported The Observer, a British newspaper.
BCCI also arranged an annual Third World lecture and a Third World prize endowment fund of about $10 million (Sh1 billion in today’s exchange rate).
Winners of the annual prize had included Nelson Mandela (1985), sir Bob Geldof (1986) and Archbishop Desmond Tutu (1989).
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Monitor water pumps remotely via your phone

Tracking and monitoring motor vehicles is not new to Kenyans. Competition to install affordable tracking devices is fierce but essential for fleet managers who receive reports online and track vehicles from the comfort of their desk.

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Agricultural Development Corporation Chief Accountant Gerald Karuga on the Spot Over Fraud –

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Gerald Karuga, the acting chief accountant at the Agricultural Development Corporation (ADC), is on the spot over fraud in land dealings.

ADC was established in 1965 through an Act of Parliament Cap 346 to facilitate the land transfer programme from European settlers to locals after Kenya gained independence.

Karuga is under fire for allegedly aiding a former powerful permanent secretary in the KANU era Benjamin Kipkulei to deprive ADC beneficiaries of their land in Naivasha.

Kahawa Tungu understands that the aggrieved parties continue to protest the injustice and are now asking the Ethics and Anti-corruption Commission (EACC) and the Directorate of Criminal Investigations (DCI) to probe Karuga.

A source who spoke to Weekly Citizen publication revealed that Managing Director Mohammed Dulle is also involved in the mess at ADC.

Read: Ministry of Agriculture Apologizes After Sending Out Tweets Portraying the President in bad light

Dulle is accused of sidelining a section of staffers in the parastatal.

The sources at ADC intimated that Karuga has been placed strategically at ADC to safeguard interests of many people who acquired the corporations’ land as “donations” from former President Daniel Arap Moi.

Despite working at ADC for many years Karuga has never been transferred, a trend that has raised eyebrows.

“Karuga has worked here for more than 30 years and unlike other senior officers in other parastatals who are transferred after promotion or moved to different ministries, for him, he has stuck here for all these years and we highly suspect that he is aiding people who were dished out with big chunks of land belonging to the corporation in different parts of the country,” said the source.

In the case of Karuga safeguarding Kipkulei’s interests, workers at the parastatals and the victims who claim to have lost their land in Naivasha revealed that during the Moi regime some senior officials used dubious means to register people as beneficiaries of land without their knowledge and later on colluded with rogue land officials at the Ministry of Lands to acquire title deeds in their names instead of those of the benefactors.

Read Also: Galana Kulalu Irrigation Scheme To Undergo Viability Test Before Being Privatised

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“We have information that Karuga has benefitted much from Kipkulei through helping him and this can be proved by the fact that since the matter of the Naivasha land began, he has been seen changing and buying high-end vehicles that many people of his rank in government can’t afford to buy or maintain,” the source added.

“He is even building a big apartment for rent in Ruiru town.”

The wealthy officer is valued at over Sh1.5 billion in prime properties and real estate.

Last month, more than 100 squatters caused scenes in Naivasha after raiding a private firm owned by Kipkulei.

The squatters, who claimed to have lived on the land for more than 40 years, were protesting take over of the land by a private developer who had allegedly bought the land from the former PS.

They pulled down a three-kilometre fence that the private developed had erected.

The squatters claimed that the former PS had not informed them that he had sold the land and that the developer was spraying harmful chemicals on the grass affecting their livestock and homes built on a section of the land.

Read Also: DP Ruto Wants NCPB And Other Agricultural Bodies Merged For Efficiency

Naivasha Deputy County Commissioner Kisilu Mutua later issued a statement warning the squatters against encroaching on Kipkuleir’s land.

“They are illegally invading private land. We shall not allow the rule of the jungle to take root,” warned Mutua.

Meanwhile, a parliamentary committee recently demanded to know identities of 10 faceless people who grabbed 30,350 acres of land belonging to the parastatal, exposing the rot at the corporation.

ADC Chairman Nick Salat, who doubles up as the KANU party Secretary-General, denied knowledge of the individuals and has asked DCI to probe the matter.

Email your news TIPS to [email protected] or WhatsApp +254708677607. You can also find us on Telegram through www.t.me/kahawatungu

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William Ruto eyes Raila Odinga Nyanza backyard

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Deputy President William Ruto will next month take his ‘hustler nation’ campaigns to his main rival, ODM leader Raila Odinga’s Nyanza backyard, in an escalation of the 2022 General Election competition.

Acrimonious fall-out

Development agenda

Won’t bear fruit

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