Investment services firm Sanlam and Stanbic Bank are seeking to quash a court order that directed them to release millions of shillings that had been flagged as possible proceeds of the National Youth Service loot, arguing that letting go of the cash exposes them to severe regulatory sanctions.
Sanlam, which is owned by the giant South African underwriter, and Stanbic, made the submission at the High Court in response to a lower court’s orders that they release the money to the depositors.
The two firms say in documents filed at the anti-corruption division of the High Court that releasing the money before its source and ownership is determined would be in breach of the proceeds of crime and anti-money laundering law.
Wangui Gethi, Martin Gachare, Charity Wangui and Eden Restaurant deposited Sh9 million in cash with Sanlam Investment in 2015 leading to its freezing on suspicion that it was part of the Sh800 million said to have been stolen at NYS.
The two financial firms moved to action a few days after the Central Bank of Kenya revealed it had imposed heavy fines on five commercial banks that handled millions of the NYS funds.
“The lower court disregarded the provisions of the Proceeds of Crime and Anti-Money Laundering Act in so far as the 2nd respondent is required to disclose the source of funds,” Jonathan Stichbury, the chief executive of Sanlam Investments East Africa, says in an affidavit.
The case is being seen an indicator of the extent to which financial institutions are ready to go to protect themselves against money laundering related sanctions.
Earlier this month, the CBK announced that it had fined Standard Chartered Bank #ticker:SCBK, Equity #ticker:EQTY, KCB #ticker:KCB , Co-operative Bank #ticker:COOP and Diamond Trust Bank Kenya #ticker:DTK millions of shillings for their handling of National Youth Service funds.
KCB was fined Sh149.5 million, Standard Chartered Bank (Sh77.5 million), Equity Bank (Sh89.5 million), Co-operative Bank (Sh20 million), and DTB (Sh56 million). President Uhuru Kenyatta last year signed into law the Anti-Money Laundering Bill that introduced tougher sanctions against economic crimes.
The Proceeds of Crime and Anti-Money Laundering (Amendment) Act, 2017, imposed stiff penalties on those found culpable besides providing for identification, tracing, freezing, seizure and confiscation of the proceeds of crime. The law states that a person, who fails to comply with the law is liable to a fine of not more than Sh5 million ($50,000), while the penalty for an institution will not exceed Sh25 million ($250,000).
Besides, an individual or institution who fails to comply with the law, is liable to an additional penalty of Sh10 million ($100,000) a day for a maximum of 180 days.
Sanlam and Stanbic argue that the court order lifting preservation of the funds is not enough to protect them from sanctions as some of those laying claim to the cash are facing charges in court.
Wangui Gethi, Martin Gachare, Charity Wangui and Eden Restaurant deposited the Sh9 million in three tranches in 2015, but attempts to register new entities as owners of the cash led to suspicion that it may have originated from the NYS.
Mr Gachare and Ben Gethi, son to Wangui Gethi were among those charged with the theft of Sh791 million from the NYS. Fresh court filings show that Mr Gachare, who was in contact with Sanlam, was unable to provide evidence of the source of the cash and its ownership.
On November 30, 2015 Wangui Gethi and Mr Gachare deposited Sh3 million into Sanlam’s Stanbic account.
Then on December 1, 2015, Eden Restaurant and Charity Wangui deposited Sh5 million in the same account before Mr Gachare separately deposited Sh1 million in the account the same day.
Sanlam reckons the account into which the funds were deposited is a collection account where money belonging to potential investors in the unit trust are held pending the opening of an investment account.
Mr Gachare on December 2, visited the Pan African Asset Management (now Sanlam) office where he provided Parachute Insurance Agency, a firm registered by Gervase Maina, as the beneficiary of the funds.
Mr Gachare initially provided his bank account details as receiver of any proceeds from the investment but allegedly changed mind and provided a bank account jointly owned by Mr Maina and one Grace Mathenge.
Mr Gachare once again decided to change the information that the investment would be in the name of Charity Wangui Gethi, provided her identification details but failed to provide bank details. In April 2016, Mr Gachare sent a demand letter seeking release of the funds to him but the request was rejected on grounds that no account was opened and no bank details provided.
Meanwhile detectives from Directorate of Criminal investigations unit obtained orders and froze the funds on suspicion that it was part of the NYS loot.
But Mr Gachare on April 12, 2018 successfully convinced the magistrate’s court to lift the freeze orders prompting Sanlam and Stanbic to contest the directive at the high court.
Justice Onyiego of anti-corruption court on May 22 suspended the proceedings at the lower court, offering reprieve to Sanlam which had argued that lifting the freeze orders was not enough to protect it against regulatory sanctions.
Mr Gachare has denied that the funds are proceeds of crime, arguing that DCI investigators allowed lifting of the orders after establishing it was legitimate income belonging to his client, Horizon Limited.
World Bank pushes G-20 to extend debt relief to 2021
World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.
“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.
He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.
The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.
People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.
For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.
Debt burdens, already unsustainable for many countries, are rising to crisis levels.
“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.
Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans
The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.
“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”
According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.
Tighter Reins on Platforms for Mobile Loans
The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.
Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.
Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.
Scope Markets Kenya customers to have instant access to global financial markets
NAIROBI, Kenya, Jul 20 – Clients trading through the Scope Markets Kenya trading platform will get instant access to global financial markets and wider investment options.
This follows the launch of a new Scope Markets app, available on both the Google PlayStore and IOS Apple Store.
The Scope Markets app offers clients over 500 investment opportunities across global financial markets.
The Scope Markets app has a brand new user interface that is very user friendly, following feedback from customers.
The application offers real-time quotes; newsfeeds; research facilities, and a chat feature which enables a customer to make direct contact with the Customer Service Team during trading days (Monday to Friday).
The platform also offers an enhanced client interface including catering for those who trade at night.
The client will get instant access to several asset classes in the global financial markets including; Single Stocks CFDs (US, UK, EU) such as Facebook, Amazon, Apple, Netflix and Google, BP, Carrefour; Indices (Nasdaq, FTSE UK), Metals (Gold, Silver); Currencies (60+ Pairs), Commodities (Oil, Natural Gas).
The launch is part of Scope Markets Kenya strategy of enriching the customer experience while offering clients access to global trading opportunities.
Scope Markets Kenya CEO, Kevin Ng’ang’a observed, “the Sope Markets app is very easy to use especially when executing trades. Customers are at the heart of everything we do. We designed the Scope Markets app with the customer experience in mind as we seek to respond to feedback from our customers.”
He added that enhancing the client experience builds upon the robust trading platform, Meta Trader 5, unveiled in 2019, enabling Scope Markets Kenya to broaden the asset classes available on the trading platform.