- The banks are KCB, Equity, Cooperative, Standard Chartered and Diamond Trust Bank
- The money will be channeled to a prosecution fund established by the DPP's office
Image: FILE
Five banks which failed to report suspicious transactions during the NYS II rip-off have paid the state Sh395 million as fines to escape prosecution.
DPP Noordin Haji on Thursday said the banks already released the money to the Central Bank in a plea bargain agreement that saw their bosses escape the dock.
The banks are KCB, Equity, Cooperative, Standard Chartered and the Diamond Trust.
The fines - imposed proportionately on the banks depending on the amounts each handled in the scandal - will be channeled to a prosecution fund established by the DPP's office.
The second NYS scandal happened in 2018 in which Sh468 million was lost through dubious tendering.
Prosecutors handling the case argue that the IFMIS system was manipulated to embezzle the funds. Former Youth and Gender Principal Secretary Lillian Mbogo Omollo as well as former NYS director general Richard Ndubai among a host of others are facing the charges.
In 2018, Family Bank agreed to pay Sh64.5 million for its role in the Sh1.6 billion first National Youth Service money laundering scandal.
The banks pleaded guilty for failing to flag suspicious transactions by customers involved in the heist.
Yesterday, Haji said that the CBK had conducted a targeted inspection on the five banks that revealed their internal administrative lapses aided laundering of the money and that "there was possible criminal culpability for the violation of the Proceeds of Crime and Anti-Money Laundering Act."
Upon the revelation, he said, DCI George Kinoti commissioned a forensic investigation that eventually recommended that the banks and their officials be charged for violating the Act.
The charges the banks faced included failure to maintain effective programme against money laundering and failure to conduct sufficient due diligence on some of the account holders.
Upon learning about the impending prosecution, the banks approached the DPP with an offer "to cooperate and resolve the matters in lieu of prosecution."
"We considered the request in line with the decision to prosecute and the need for the application of alternatives to prosecution and a decision to enter into deferred prosecution agreement was accordingly reached," he said.
As part of the agreement, the banks committed to review their systems to seal the loopholes that could be exploited by crooks to commit crime in the future.
Among the actions required are taking disciplinary action against their staff who may have colluded with the suspects to launder the tax payers' money.
They are also to do extensive anti-money laundering training for all their staff and boards as well as modernise their money tracking systems for effective oversight.