Bank CEOs to pay costs of fraud in the BBI proposals
Chief executives of commercial banks will be required to pay part of the costs or all the costs arising from fraudulent activities involving their institutions, if the Building Bridges Initiative (BBI) report sails through.
The report seeks to introduce accountability in the financial system by having bank chiefs held responsible for the loss of funds.
It also recommends further integration and analysis of bank data into the Central Bank of Kenya (CBK) system through big analytics to ensure a sound financial system.
Corrupt dealings
“The CBK as the principal regulator of banks and other financial institutions, should ensure that CEOs of banks found to have engaged in corrupt dealings are penalised by paying part or all of the value of assets laundered through their banks,” report said.
By extension the CBK will withdraw licences from banks that have repeatedly been found to have engaged in corrupt dealings.
The report adds that the regulator will levy heavy penalties for banks executives that are found to be laundering money.
The radical proposal are a departure from the past where banks were just required to pay a fine while the management went scot free.
The proposals are aimed at reducing incidences of corruption, especially, in the public sector where stolen money is deposited in various commercial banks through proxy accounts but banks fail to raise alarm.
For instance, when money was lost through NYS scandal, various banks were penalised for abetting crime but the CEOs escaped.
The banks include KCB Equity Bank Standard Chartered Bank Co-operative Bank and Diamond Trust Bank were fined.
However, the CEOs of the respective banks were not implicated in the scandal and were left to go scot-free.
The five were early this year made to pay a fine of Sh395 million for helping launder the NYS funds stolen through procurement irregularities.
National Youth Service scandal happened in 2018 where Sh468 million was lost through dubious tender process awards.
These banks pleaded guilty for failing to flag suspicious transactions by customers who took part in the theft of the public funds.
Licences of banks
The report also recommends that the licences of banks that have been involved in multiple corruption dealing should be withdrawn.
The recommendation is part of the wider agenda in the whole BBI report to deal with rampant graft cases across government entities where banks are major conduit of stolen money.
This report also wants Central Bank of Kenyan to sustain its supervision on banks especially with regard to suspicious transactions.
Commercial banks are also required to implement strong know your customer measures.
