Charterhouse not out of the woods

December 14, 2010 12:00 am

, NAIROBI, Kenya, Dec 14 – Even with the clean bill of health given to Charterhouse Bank by Parliament, the Kenya Anti-Corruption Commission is still investigating to establish if the bank was in any way involved in money laundering and other financial malpractices.

KACC Director Patrick Lumumba has said his detectives have initiated a probe on the matter after a report was presented to them by American Ambassador Michael Ranneberger.

Last week, a parliamentary committee that was investigating the closure of the bank cleared it of any misconduct, sparking mixed reactions from financial experts and other related organisations.

The bank was closed on June 23, 2006 following allegations that it was involved in serious financial misdeeds, mainly money laundering.

A report tabled in Parliament on Wednesday last week and adopted on Thursday now says the parliamentary committee did not find any of the allegations credible and recommends that government reopens it without any further delay.

The recommendation by the 11-member committee led by Nambale Member of Parliament Chris Okemo to re-open has sparked outrage from a section of leaders, civil society and financial experts who read mischief in the recommendation.

The MPs’ decision came even as Mr Ranneberger presented fresh evidence to the Kenya Anti-Corruption Commission [KACC], demanding action to be taken on the bank’s activities.

The Kenya Bankers Association Executive Director John Wanyela says as long as the bank is under investigations, its membership is suspended.

"I will only deal with a licenced and authorised organisation. As it is, Charterhouse Bank is not our member because it was suspended immediately it was put under receivership," Mr Wanyela said and protested that KBA was not even invited for submissions by the parliamentary committee.

"We only hear that the bank has been cleared by the parliamentary committee, we have not even seen the report ourselves," Mr Wanyela said in a telephone interview.

He said KBA will be meeting to discuss the report and give a position.

However, Mr Wanyela said the Central Bank of Kenya (CBK) or any other government institution was not under any obligation to comply with the report.

"This is a report just like any other report, no one is under any obligation to adopt all its recommendations," he said.

CBK Governor Prof Njuguna Ndung’u has not publicly commented on the report and our efforts to get his comment were futile as he was said to be on an official trip to Seoul, South Korea.

In its recommendations, the departmental committee on Finance, Planning and Trade said they did not find any evidence to show that the bank was involved in money laundering as alleged.

The report further states that at the time the bank was closed, there was no anti-money laundering legislation in place and concludes that the bank could not have flouted a law that was not even in place.

"There was no anti-money laundering legislation as at 23rd June, 2006 and no credible evidence was presented before the committee that Charterhouse bank would have been involved in money laundering," the report states and concludes that "Therefore, Charterhouse bank was not involved in money laundering."

The committee says it also investigated if the bank was involved in siphoning money to offshore accounts and did not find evidence to that effect.

It says the Central Bank Governor and the Statutory Manager who were in charge of the bank for four years "did not present before the committee any credible evidence of money siphoned from any account from charterhouse bank to any account in foreign countries."

The committee was also petitioned to investigate whether Charterhouse bank was involved in having fictitious accounts without tittles or names of the account holders as had been alleged.

The Okemo-led committee concluded that even after interviewing the CBK Governor, no evidence was found to that effect.

"The governor of CBK and the statutory manager appeared before the committee and did not give any credible evidence of any fictitious account that did not have a title," the MPs wrote in their report.

"No money was found in the bank or banking system without identity of the owner," it adds.

Violation of CBK prudential guidelines

Although the committee cleared the bank from allegations of money laundering, it found it guilty of violating the Banking Act and regulations of the CBK.

The MPs however argued that such violations did not justify the closure of a bank because many other banks violate similar regulations.

The committee said it had received credible evidence showing that Charterhouse bank violated sections 10, 11 and 50 of the Banking Act and CBK Prudential Guidelines as well as guidance on Foreign Exchange transaction as outlined on section 4, 5.2, and 6.5.

"The CBK Governor confirmed that these violations are common violations by the banks in the conduct of banking business and the Attorney General confirmed that these are technical offences remedied by way of monetary penalty," the report said.

In conclusion, the committee said its investigations had established that Charterhouse was only put under statutory management due to the generated negative publicity against the bank.

The report says even the chief public prosecutor Keriako Tobiko had informed them that the alleged violations of the Banking Act were technical offences "which do not justify the closure of a bank."

Drug Trafficking

The committee concluded in its report that there was no credible evidence on whether the Ministry of Internal Security had any proof of any depositor, shareholder or director being involved in any criminal activity, i.e money laundering, drug trafficking or terrorism.

Parliament kicked off investigations into the operations of Charterhouse bank following a petition tabled in Parliament in July 2010 by Yatta MP Charles Kilonzo.


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