EDITORIAL: Penalty on banks over NYS will aid graft war - Daily Nation

Penalty on banks over NYS will aid graft war

Thursday September 13 2018

By EDITORIAL
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The move by the Central Bank of Kenya to punish banks that handled cash looted from the National Youth Service will greatly boost the war against corruption.

Indeed, the only regret is that it is coming too late in the day when very many crimes have been committed, which the banks would have stopped.

Nevertheless, it sends a strong message that handling stolen cash or abetting activities of looters is not only illegal, but very costly.

CBK has fined five banks — Standard Chartered, KCB, Equity, Cooperative and Diamond Trust — Sh392.5 million for their failing to report dubious dealings, contrary to the law that obliges them to alert the regulator whenever they detect suspect transactions within their systems.

RAISED ALARM

It is paradoxical that the banks never raised the alarm over the suspicious movement of NYS cash yet, ordinarily, they ask tough questions whenever they see huge transfers.

In the initial scandal at NYS in 2016, when Sh791 million was lost, some banks were reported to have allowed huge cash withdrawals without question, in contravention of banking rules and regulations.

In such cases, they cannot extricate themselves from culpability — they were clearly aware and complicit, which is quite absurd because of the trust the public bestows upon them.

Corruption is executed through a large network of individuals and institutions. Tackling it requires concerted and coordinated effort by state agencies, private sector institutions, the Judiciary and the Legislature. All play diverse roles in promoting the rule of law and a lapse by any of them creates a window for graft and theft.

CASH TRANSFERS

Banks are particularly integral in the fight because they predominantly handle money. Cash transfers are made through them, except in the exceptional case of black market operations. And they are always smart enough to discover any irregular business.

So, they have no excuse for not reporting to CBK when some individuals or firms conduct cash transfers that seem out of the ordinary.

All the mega scandals have been aided in one way or the other by the banks. And the cost of graft is enormous.

Going forward, the Central Bank must intensify surveillance on commercial banks’ operations and those found to flout the rules heavily penalised.

In this regard, investigators should routinely expose banks that are used by the looters and the corrupt to transfer cash.

The argument is that the fight against graft must extend to all institutions and respective regulators are obliged to enforce penalties whenever players in their sectors transgress.