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Kenya: CBK Gets More Time to Investigate Charterhouse Bank
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Business Daily (Nairobi)
10 September 2007
Posted to the web 10 September 2007
Geoffrey Irungu
The Central Bank is expected to finalise investigations into allegations of malpractices at Charterhouse Bank within the next 10 months.
CBK was granted a 12-month extension for statutory management by the High Court on June 22 this year after it sought orders for the extension arguing that it had not completed the work it had set out to do.
Former statutory manager Rose Detho, now in charge of bank supervision, told Business Daily that work was going on as planned, but she declined to comment further saying that there were various cases in court regarding the bank.
In seeking for the extension, Ms Detho clearly set out eight grounds for suspicion which she believed supported her contention for continued management of the bank by the CBK.
One was suspicion that the bank had offered credit facilities before their beneficiaries had executed letters of offer and in some cases there were no such offers at all.
The second allegation was that loans were given on strength of verbal instructions from directors.
The third allegation was that some customers held multiple accounts which were suspect and CBK needed to investigate the nature of transactions in such accounts.
The fourth claim was that there was evidence of electronic transfer of funds without corresponding instructions and entries without appropriate authority.
There was suspicion of tax evasion - that some members of the bank's staff were paid cash bonuses outside the payroll and had not been subjected to tax.
Account opening forms for 45 suspect customer transaction accounts were not available contrary to "know your customer" regulations of the CBK.
The bank was accused of engaging in offshore money transfers involving the splitting of transactions.
The other allegation was that cheques drawn at customer's accounts were routinely cleared through a lawyer's client account.
At the time when the bank was placed under statutory management, the CBK did not go into details of why it had acted on the bank.
It merely stated that CBK had acted "in order to protect the interests of Charterhouse Bank Limited, its depositors and other creditors."
However, Charterhouse Bank lawyers argued against the continued management of the bank by the CBK.
No business
They argued that the manager had not conducted any banking business, had refused to allow deposits and withdrawals and refused to allow opening of any letter of credit, among other allegations.
They said that it was only fitting that Charterhouse Bank be removed from management by the CBK.
But Justice M. A. Warsame said that he did not see why he should stop the CBK from continuing with management of the bank since it was yet to complete the work it was supposed to do on taking over on June 22, 2006.
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Said the judge: "It is my understanding the period to be extended would assist the manager to capture through inspection, audit and investigation the real owner of the horse that does not want to play within the rules.
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