The Office of the Director of Public Prosecutions (ODPP) on Wednesday said it will charge the CEOs of Co-operative Bank, KCB and NCBA for failing to report suspicious transactions in connection with the loss of Sh363 million in an investment firm, escalating the fight against money laundering.

The CEOs -- Gideon Muriuki of Co-operative Bank, KCB’s Paul Russo and John Gachora of NCBA -- are required to appear before a Milimani court in Nairobi on August 11 over the alleged failure to comply with reporting institutions’ obligations.

The chief prosecutor indicated the CEOs failed to report suspicious transactions from funds believed to have been stolen from First Assurance Investment Ltd.

The ODPP and the Central Bank of Kenya (CBK) have previously preferred to fine banks for violating anti-money laundering laws, while warning that the office of the chief prosecutor reserved the right to prosecute them in the future.

The ODPP alleges that the three CEOs failed to report the suspicious transactions relating to the fraud, personally holding the heads of the top banks liable, sending shockwaves across Kenya’s capital markets and banking sector.

The charge sheet stated that they conspired with Salim Mohamed Busaidy to defraud First Assurance Investment of the money.

It is alleged that they committed the offence on different dates between May 18, 2018 and April 30, 2024.

Mr Busaidy was a director of the insurance firm and is accused of stealing a total of Sh363.3 million belonging to First Assurance Investment. The money allegedly came into his possession due to his position as a director of the company.

The ODPP said the CEOs will be charged with failure to report suspicious transactions regarding proceeds of crime, contrary to Section 5 as read with Section 44(2) of the Proceeds of Crime and Anti-Money Laundering Act.

The ODPP said investigations established that Mr Busaidy, a former nominated Member of the County Assembly (MCA), forged the signature of his co-director, Issa Abdalla Issa Timamy, who is also the Lamu County governor, on multiple company cheques to facilitate the unlawful withdrawal of the company’s funds.

Mr Busaidy denied a total of 120 counts, including conspiracy to defraud and stealing, 114 counts of making a document without authority, and one count of acquisition of proceeds of crime.

The prosecution alleged that Mr Busaidy exploited his position as a director and his access to the company’s bank accounts held at NCBA Bank, KCB Bank and Co-operative Bank to steal the money.

The prosecution further alleged that he forged the signature of his co-director, Mr Timamy, on numerous company cheques, falsely presenting them as duly authorised, thereby facilitating the unlawful withdrawal of company funds.

The charge sheet shows that he presented cheques of various amounts, ranging from Sh150,000 and Sh350,000 and purported to have been signed by his co-director.

The DPP further contends that the accused acquired Sh363,320,459, knowing the money constituted proceeds of crime arising from the alleged theft.

He denied all the counts and was ordered to deposit cash bail of Sh3 million or an alternative bond of Sh10 million with one surety of a similar amount, to secure his release.

The ODPP reserves the right to charge or withdraw the suit, which is the most significant against banking CEOs.

NCBA Bank, KCB Group and Co-operative Bank are listed at the Nairobi Securities Exchange (NSE).

KCB is Kenya’s largest bank on assets, with Co-operative Bank and NCBA Bank coming at number three and four.

The CBK fined five banks in 2018 for failing to report suspicious transactions in connection with the theft of funds at the National Youth Service (NYS), a State agency.

Penalties totalling Sh392.5 million were imposed on Standard Chartered Kenya, Equity, Diamond Trust, Co-operative Bank and KCB Group.

The banks had received a total of more than Sh3 billion from the NYS on behalf of their customers, but failed to report the suspicious transactions, the CBK said.

In 2020, the chief prosecutor fined the five banks Sh385 million for violating anti-money laundering laws, adding that further investigations found the lenders had failed to put in place adequate systems to combat money laundering and to know their customers as the law required.

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