Connect with us

General

KISERO: Banks must report suspicious transactions to beat terrorism

Published

on

Loading...


By JAINDI KISERO
More by this Author

As investigations into the recent terrorist attack on 14 Riverside Drive that left 21 people dead and scores injured continue, I am astonished by the revelations coming out of the court proceedings, especially regarding money laundering and terrorism financing.

It seems the criminals are ahead of us in targeting weak links in the financial systems.

Until recently, the most popular money laundering technique was smurfing, that is, placing small amounts of dirty money into financial institutions in ways that do not trigger suspicious reporting requirements.

The court proceedings show that these criminals have now become adept at exploiting loopholes in our mobile money, the fastest-growing segment of our financial systems, to dodge reporting.

They use false identification documents to obtain subscriber status. By registering multiple distributor agency shops, they withdraw large sums of money from banks and elude reporting by disguising it as ‘float’ being transported to mobile money distributor shops.

That is a worrisome trend because, at this rate, we are increasingly going to be exposed as lacking in capacity to deal and manage the threats that international money laundering poses to our financial systems.

It seems that prevention and blocking the loopholes exploited by criminals who perpetrate terrorism financing is not among the high security enforcement priorities of our time. For, truth be told, we don’t have a suspicious reporting system to speak of in this country.

Four years, ago, in the wake of the Garissa University massacre, the government moved to suspend the licences of 13 Somali-domiciled cash transfer companies and announced that it also planned to freeze accounts of a dozen individuals, NGOs and travel agencies suspected to be funding terrorists.

Shortly after, the issue of dealing with entities suspected to be involved in perpetrating terrorism financing was put on the back burner.

More recently, the Governor of the Central Bank of Kenya, Dr Patrick Njoroge, came out — for the first time in the country’s history — to slap fines on banks for lapses and poor reporting of anti-money laundering and suspicious transactions.

The fines touched on illegal payments laundered out of State coffers by perpetrators of the infamous National Youth Service scandal through the banking system.

Loading...

Even more interesting was the fact that all of our top-rated banks were caught in the dragnet. If the top banks can be found to have shown such material weaknesses and lapses, what should we expect of smaller lenders with less resources to devote to anti-money laundering reporting?

Clearly, to stem money laundering and terrorist financing activities, our banks will have to take the job of reporting suspicious transactions more seriously.

A few months ago, Kenya Bankers Association came up with new guidelines on large cash transactions. It said that bank customers will now be required to provide evidence and proof of source of funds when depositing large amounts.

The deliberations of the court proceeding in the Dusit terrorist attack have shown that these guidelines are honoured more in breach than in practice.

And it is not as if we don’t have a good enough legal framework for combating money laundering and terrorism financing.

We have both a proceeds of crime and anti-money laundering law and another to combat terrorism financing.

In addition, we have a full-fledged financial reporting centre — Financial Reporting Centre — complete with infrastructure to trace, seize and confiscate proceeds of illegal payments and other forms of suspicious currency transactions.

At present, the law requires commercial banks to report all transactions above Sh1 million to the FRC on a daily basis.

But the problem is that, even though FRC receives and processes information on suspicious transactions, it does not have a database robust enough to process the information and flag the suspicious deal in real time.

Yet the information coming through is massive. With limited data capability, FRC cannot do much. You don’t put a 40-foot-container on top of a Volkswagen Beetle and expect the car to carry the weight!

Another tell-tale sign of our financial system’s vulnerability to suspicious transactions is the mushrooming forex bureaus that operate with scant regard of Central Bank’s KYC (know your customer) guidelines.

CBK should crack down on banks found to have abetted terrorism financing. Only then shall we start seeing banks taking KYC and reporting of suspicious transactions seriously, which will deal a blow to terrorism.



Loading...

General

Sordid tale of the bank ‘that would bribe God’

Published

on

Loading...

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).
[email protected]    

Loading...

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.

Loading...
Continue Reading

General

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

Published

on

Loading...

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

Loading...

“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

Loading...
Continue Reading

General

William Ruto eyes Raila Odinga Nyanza backyard

Published

on

Loading...

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

Loading...
Continue Reading
Advertisement
Loading...
Advertisement
Loading...

Trending

Kenyan Tribune