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Tougher bank rules make the corrupt hide loot at home

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In the new rules, bank customers are now required to give a three-day notice to make over the counter transactions of more than Sh10 million. PHOTO | FILE | NATION MEDIA GROUP

By KIPCHUMBA SOME

In June last year, a senior official in the Ministry of Roads helped a Chinese contractor win a lucrative tender to construct a road worth more than Sh7 billion in the western part of the country.

For his services, the Chinese company agreed to “reward” him and his bosses with $1.5 million (equivalent to Sh150 million in today’s exchange rate), a tidy nest egg since he is nearing retirement.

However, for a year now, he has not been able to benefit substantially from the money as he would have liked, primarily because he has been unable to bank it and use it for a meaningful project, such as buying property.

His Chinese benefactors suggested that they wire the money directly to his Kenyan accounts, but he declined since this would have immediately raised suspicions within Central Bank of Kenya (CBK).

CASH IN HOMES

Furthermore, such a move would definitely have attracted the interest of investigative agencies, such as the Directorate of Criminal Investigations and the Ethics and Anti-Corruption Commission.

In the end, he opted to take the money in cash from the Chinese contractors in dollar denominations, hoping to convert and bank it slowly by slowly while praying that he won’t be noticed by the authorities.

His story is easily that of many “tenderpreneurs” in government today, who find themselves with huge amounts of cash acquired in questionable dealings but which they try to hide from the authorities.

Afraid that banks will out them to investigators, a number of these wheeler-dealers have resorted to the old solution: hiding the cash in their homes and hope for the best.

MONEY RECOVERED

The most recent is a case of a personal assistant of a senior Jubilee official in whose homes officers from the DCI are said to have recovered more than Sh700 million two weeks ago, even though the matter seems to have been successfully hushed. But the personal assistent is not alone in the predicament.

In May this year, EACC detectives investigating a Sh647 million Kenya Pipeline Company payout for hydrant pit valves supplies recovered Sh4 million from a suspect’s residence in Nairobi.

The detectives recovered the cash from the Nairobi home of a KPC official attached to the finance section after a two-hour search.

Exactly a year before this incident, EACC sleuths mounted a sting operation on top officials of the National Land Commission where they seized Sh18 million in the home of one of the officers.

“We have recovered almost Sh18 million, Sh16 millions of which is in foreign currency (US dollars) and the rest in Kenyan shillings,” EACC deputy chief executive Michael Mubea said at the time.

EMBEZZLEMENT

The raid was part of investigations into a compensation scheme involving the standard gauge railway project, which has seen NLC Chairman Muhammad Swazuri and other senior officials charged in court recently.

A case that has been going on before a Mombasa High Court since last year reveals how cases of hiding cash at home could be prevalent among civil servants.

EACC detectives told the court that they recovered more than Sh9 million from the homes and offices of a couple, Thomas Gitau Njogu and Teresia Njeri Gitau, during a raid in August 2017.

Mr Njogu was appointed Senior Assistant Accountant General in the Ministry of Interior and Coordination of National Government in December 2015, but between January 2016 and July 2017 EACC claims he deposited more than Sh111 million in bank accounts of companies owned by the couple.

“The plaintiff (EACC), in the course of its investigations, established that between January 1, 2016 and August 31, 2017, 1st Defendant (Mr Njogu) made cash deposits into bank accounts … totalling Sh111,681,931.98 excluding his salary.

“These monies, the plaintiff reasonably believes that the 1st defendant was engaging in embezzlement and/or misappropriation of public funds through accessing unauthorised petty cash (“buffer cash”) by virtue of his position…,” EACC officers said in their statement before court.

UHURU’S DIRECTIVE

During the period under question, Mr Njogu, was earning a gross salary of Sh155,000 per month, which brought his net salary to a total of Sh1.8 million. EACC detectives say he never touched his salary during this time, suggesting he had other undeclared sources of income.

“The property in $3,500 and Sh8.22 million seized from the 1st defendant’s residence and office should be detained pending the determination and/or declaration on whether the said assets constitute unexplained assets pursuant to the provisions of Section 55 of the Anti-Corruption and Economic Crimes Act, No. 3 of 2003,” EACC’s advocate, Grace Wambui Maina, said in an affidavit dated August 22, 2018.

The noose began tightening on corrupt civil servants, businessmen and rogue financial institutions in November 2015 after President Uhuru Kenyatta called for tough penalties against individuals and institutions who flout anti-money laundering laws.

A 2013 report by Washington-based non-profit, research and advocacy organisation, the Global Financial Integrity (GFI), captured this dire situation, saying Kenya is the easiest place in the world to open a shell company.

SOURCES OF INCOME

Following the President’s directive, the Central Bank in January 2016 wrote to lenders instructing them to have their customers complete forms explaining the nature of any large cash transactions amounting to Sh1 million and above.

In the stringent rules, Kenyans transacting large sums of cash must now clearly state the source of the money being deposited or being withdrawn over the counter; whether the nature of their business generates substantial amounts of cash to support the large cash transaction; why the large cash deposit or withdrawal is necessary; why the cash deposit or withdrawal cannot be made through electronic means; and also where the money will be taken to from the bank premises.

Additionally, customers have to state what the money is going to be used for, who are the direct and indirect beneficiaries of the money, and state the full identity of the intended beneficiaries of the money.

In addition to this, the Kenya Bankers Association introduced even more stringent rules in June following the eruption of a second scandal at the National Youth Service.

NEW RULES

In the new rules, bank customers are now required to give a three-day notice to make over the counter transactions of more than Sh10 million, complete with supporting documents such as the source of the money, the purpose for withdrawing funds, the reason why real-time gross settlement cannot be used, and ID/passport copies of persons involved in the transaction.

KBA’s new guidelines require the approval of the branch manager for cash transactions of Sh1 million to Sh10 million or the equivalent while cash transactions of Sh10 million to Sh20 million or the equivalent will require the approval of the regional branch manager or the senior manager.

The phenomenon of hiding huge sums of cash in homes is not entirely new in Kenya. This method is common in Nigeria.

In April last year, for example, the Nigerian anti-corruption unit discovered more than $43 million (Sh4.3 billion) in US dollars at an upscale apartment in Lagos.

Two months before that, they had recovered a total of $9.8 million from a building belonging to a former Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Andrew Yakubu.

Source: Daily Nation

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