Five banks linked to the NYS lost funds have failed to convince the regulator why they violated the anti-money laundering regulations in NYS transactions amounting to Sh3.5 billion.
Central Bank will go ahead to impose the Sh392.5 million in penalties on the banks as assessed and announced on September 21. The banks are Standard Chartered, Equity Bank, Kenya Commercial Bank, Cooperative bank and Diamond Trust bank Kenya.
They are accused of failure to report large cash transactions, failure to undertake adequate customer due diligence, and lack of supporting documentation for large transactions.
The five were given 14 days to submit action plans that would strengthen the banks’ anti-money laundering and countering of financing of terrorism (AML/CFT) frameworks.
Additionally, they were given a chance to respond to the regulator on why they should not be penalised. The banks did not deny breaking the money laundering regulations but instead committed to comply with the regulators request.
The responses also related to CBK’s assessment of the associated penalties and Action Plans to address the identified lapses.
“CBK has reviewed each bank’s response to the penalty assessment and has concluded that the submissions were not sufficient to alter the findings of the investigations and the penalties assessed. Consequently, CBK has levied the penalties as assessed,” the regulator said in press statement.
Imposing the fines on the banks means that Standard Chartered Bank will pay Sh77.5 million for handling Sh1.62 billion.
Equity Bank transacted Sh886 million and will pay Sh89.5 million in fines. KCB transacted Sh639 million and will pay Sh149.5 million in penalties.
Co-operative Bank transacted Sh263 million and will pay Sh20.0 million while Diamond Trust Bank transacted Sh162 million and will pay Sh56.0 million.
Despite the stay of penalty being upheld, the regulator noted that the five banks will be put under watch.
“The actions taken by CBK are aimed at safeguarding stakeholders’ interests and maintaining a healthy financial sector,” CBK said.
While the main objective of the investigations was to examine the operations of the NYS-related bank accounts and transactions, they prioritised banks that handled the largest flows.
In February 2016, CBK Introduced guidelines to govern transactions worth more than a million over the counter.
Under the regulations, a customer is required to fill a mandatory cash withdrawal form stating where the money is being taken and the use. The guidelines came after the theft of billions of shillings from NYS, in the initial scam in which taxpayers lost over Sh1.6 billion.