Nearly half of Kenya’s banks handled the hundreds of millions of shillings that were stolen from the National Youth Service (NYS).
The Financial Reporting Centre (FRC) reckons that 15 of Kenya’s 41 banks raised 42 alerts over suspicious transactions relating to the Sh1.6 billion that was stolen through fictitious tenders.
The Central Bank of Kenya slapped three banks with a total fine of Sh3 million for failing to report suspicious transactions relating to the NYS scandal—putting the total lenders that handled the money at 18.
The FRC—the state agency that tracks proceeds of crime—reckons that other agencies like anti-graft body and Directorate of Criminal Investigations (DCI) were slow to act on its alerts, enabling the theft of nearly Sh2 billion.
Analysis of the 20 bank accounts of the NYS scam chief suspect, Josephine Kabura, indicates that she received Sh1.6 billion between October 2014 and December 2015.
This means the scam ran for nearly 15 months and could have been detected and stopped earlier had reports of suspicious transactions been acted upon by the agencies.
“You failed in your mandate; the money was stolen and stashed away in different financial institutions. I have no doubt the failure of the FRC will be one of the biggest culprits in the theft at NYS,” said Balambala MP Abdikadir Aden.
He spoke when Mr Alex Nandi, the acting FRC director, appeared before the Public Accounts Committee (PAC)—which is investigating the theft.
Manipulation of the government’s financial management software, outright forgery and neglect of duty enabled the theft of Sh1.6 billion, the Auditor-General has revealed.
The NYS cash was illegally moved through commercial banks into individual’s pockets and ultimately used to buy personal assets with withdrawals of Sh100 million being made per day by a single borrower.
Financial institutions are required to report all transactions above Sh1 million ($10,000) to the FRC, but most are not. Of the 42 alerts of suspicious transactions, the FRC prepared and disseminated 19 financial intelligence reports for the Ethics and Anti-Corruption Commission (EACC) and DCI action.
“The role of FRC is limited to analysis of suspicious transactions and provision of intelligence to law enforcement agencies and does not include investigation, prosecution and asset recover,” said Mr Nandi.
He declined to name the 15 banks linked to the suspicious transactions alert. But seven banks have appeared before PAC.