The Financial Reporting Centre arm of Central Bank of Kenya is not dealing with reported suspicious transactions that may be connected to corruption. Family Bank’s chairman Wilfred Kiboro said this is aiding corrruption.
Commercial banks are required to report deposits or withdrawals of more than Sh1 million to the FRC.
In September, KCB Bank said it made 653 reports on suspicious transactions from 2015 to August this year to the CBK, among them relating to National Youth Service (NYS) Sh8 billion money-laundering scandals, but it did not receive any feedback from the regulator. This was days after CBK penalised KCB Group Sh149.5 million for aiding in the transfer of money.
Other banks penalised included Equity Bank (Sh89.5 million), Standard Chartered Bank-Kenya (Sh77.5 million), Diamond Trust Bank (Sh56 million) and Co-operative Bank of Kenya (Sh20 million).
“FRC is heavily compromised and it’s not working enough when it is in a position to highlight such graft cases,” Kiboro said during a statement on the next anti-corruption strategies by the recently formed Multi-Sectoral Forum.
“Banks are highly regulated. But now the financial system need to work beyond those regulations and move to issues of compliance to combat theft of public funds,” he added.
Kiboro said the multi-sectoral forum will hold discussions with key figures in financial system including the CBK governor, FRC, other financial institutions such as Saccos and micro-finance, finance ministry and board structures to employ self-regulatory governance.
“Much focus on investigations has been on the CEOs and the board, when even the employees could be the law offenders. This also affects banks’ investor value,” Kiboto said.
Kiboro said self-regulation will have the industry work not only on the predetermined rules by also being proactive in engaging with stakeholders such as the customer and regulator to rebuild the public trust.
Corruption has led to an annual loss of 30 per cent of the national budget, translating to Sh1 trillion stolen from the public purse.
It has been faulted for inflation of value of delivery to the private sector and increment in taxation to recoup stolen funds, and poor service delivery.