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EDITORIAL: Ensure banks play part in graft fight

by kenya-tribune

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Central Bank Governor Patrick Njoroge’s renewed pledge to crackdown on rogue banks facilitating corruption is critical in the crusade against the vice.

But the test will come in execution. The sanctions must extend beyond the banks involved to include the individuals who actually sign off or authorise dubious transactions through which taxpayers’ cash is stolen.

The widespread corruption that has nearly grounded the economy has been aided by willing banks that have allowed wheeler dealers to pass money through their counters.

For some reason, the banks have never been targeted. On their own they apply very stringent rules for normal transactions.

Ordinarily, any transaction of a sum more than Sh1 million is subjected to questions. Those transferring or receiving the cash are routinely asked the source and purpose just to be sure it is for legitimate purpose.

This is the reason the public was miffed that in the case of the National Youth Service, where some Sh791 million was lost in the first scam, so many suspect transactions were made — irregular deposits and huge withdrawals — but the banks never raised the alarm notwithstanding the existing regulations outlawing such.

So far, the Central Bank has punished five banks — KCB, Equity, Standard Chartered, Diamond Trust and Co-operatives — for handling money stolen from the NYS.

But there are subsequent huge corrupt deals that have since come to light and for which huge sums of money moved from banks to banks and for which investigations ought to be carried out and actions taken.

We have often argued the war against corruption can only succeed if every player in the chain acted in concert and executed their mandate to the letter.

As the main conduits for money transfers, banks have systems to detect illicit cash flows and in turn, block them.

But this seems to have failed in regard to the corruption cases, which suggests complicity. Besides sending out the alarm, it is imperative the accounts so established to have stolen money are frozen.

Whereas in the past corrupt officials siphoned cash out of the country or organised deals and payments were made in offshore accounts, the global networks are shrinking.

Countries that erstwhile provided safe havens for illicit cash have tightened rules and outlawed such deals.

With the international outlets thinned out, the option available for looters are local banks such that if they also tighten the screws, then the corrupt networks will be badly exposed.

And that is the way to go to end this evil that has eaten right into the heart of the economy.

The point we are making is that the financial institutions — banks, co-operative societies and insurance — must play by the rule and close all the windows that allow shifting of stolen money.

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