The High Court has temporarily stopped the prosecution of the chief executives of NCBA Group, KCB Group and Co-operative Bank over their alleged failure to report suspicious transactions linked to a Sh363.3 million fraud involving First Assurance Investment Ltd.

Justice Gregory Mutai on Friday issued separate conservatory orders barring the Director of Public Prosecutions (DPP) and other State agencies from arresting, charging or requiring the three bank chiefs to take plea until their constitutional petitions challenging the prosecution are heard.

The orders suspend criminal proceedings against NCBA Group Managing Director John Gachora, KCB Group Chief Executive Paul Russo and Co-operative Bank Chief Executive Gideon Muriuki, who had been summoned to appear before the Milimani Anti-Corruption Court on August 11.

In Mr Russo's case, the court restrained the respondents from “arresting, detaining, presenting before court, requiring a plea from, or commencing or continuing criminal proceedings” against the KCB boss pending the hearing of his application.

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In a separate order, Justice Mutai similarly barred the prosecution of Mr Muriuki and Co-operative Bank, directing that “an interim conservatory order is hereby issued restraining... the respondents... from arresting, presenting for purposes of plea taking, charging and/or prosecuting” the bank and its chief executive pending the hearing of their application.

Mr Gachora also secured interim relief suspending summons requiring him to appear before the anti-corruption court while his petition challenging the intended prosecution is determined.

The DPP, Renson Ingonga, approved charges against the three executives over allegations that they failed to report suspicious transactions through their banks' anti-money laundering systems.

The charges arise from investigations into the alleged theft of Sh363.3 million from First Assurance Investment Ltd by its former director, Salim Mohamed Busaidy.

According to the charge sheet, Mr Busaidy allegedly siphoned the money between May 18, 2018 and April 30, 2024 by exploiting his position as a director and accessing the company's accounts held at NCBA Bank, KCB Bank Kenya and Co-operative Bank.

The prosecution alleges that he forged the signature of his co-director, Lamu Governor Issa Abdalla Issa Timamy, on multiple company cheques to facilitate the unlawful withdrawal of company funds.

Investigators claim the forged cheques, valued at between Sh150,000 and Sh350,000 each, were presented as duly authorised, allowing the money to be withdrawn over several years.

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

He was released on a cash bail of Sh3 million or an alternative bond of Sh10 million with one surety of a similar amount.

The DPP has also charged the three bank executives with allegedly failing to report suspicious transactions involving the suspected proceeds of crime, contrary to Section 5 as read with Section 44(2) of the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA).

In his petition, Mr Gachora argues that the decision to prosecute him amounts to an abuse of prosecutorial powers and is founded on a misinterpretation of POCAMLA.

He maintains that Regulation 34 places the legal obligation to file suspicious transaction reports on a bank through its designated anti-money laundering reporting officer, rather than on a chief executive in his personal capacity.

“The charges are founded upon a manifest error of law that goes to the root of the prosecution,” Mr Gachora said in court papers.

The constitutional petitions filed by the three banking leaders are expected to test the extent of personal criminal liability for bank chief executives under Kenya's anti-money laundering laws, with the outcome likely to have far-reaching implications for governance and compliance across the banking sector.

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