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The Imperial Bank Saga
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On October 2015, news of Imperial Bank being placed under receivership made headlines in all
Kenya media houses. This was barely months before Kenyans had recovered from similar
measures taken against Dubai Bank. It was later revealed that the drastic decision was made after
learning of fraudulent, dubious and shady transactions perpetrated by the late MD, Janmohamed.
It was revealed to the board that the late MD had been disbursing loans amounting to billions of
shillings fraudulently, to his friends and business associates. All these disbursements had been
concealed from the board of directors. The two senior bank managers alleged that the late MD
had over a number of years dictated the head of credit to advance funds to certain clients without
going through formal credit processes in line with prudential guidelines and the bank's internal
lending procedures and policies. He unilaterally forced, intimidated and threatened the CFO
(Chief Finance Officer) to use 'creative accounting' to hide what was effectively embezzled from
the bank. It was then established that there were significant differences on loans, overdrafts,
investments and deposits from what had previously been reports to the bank's board1.
After the bank was placed under receivership, it was expected that all depositors would demand
for their cash. However out of the 50,000 Imperial Bank depositors, only 10,600 have lodged
claims for compensation through Kenya Commercial Bank (KCB) and Diamond Trust Bank
(DTB) to demand their cash. This has raised concerns about the true identity of the
depositors.Who are these people? Why don’t they claim? Are there ‘ghost account holders' in the
banking system? This sparks more questions than answers.The CBK should exercise its
supervisory role and oversee operations of financial institutions as mandated in the Central Bank

of Kenya Act2.
The banking regulator CBK should be keen in monitoring banking institutions and step in
immediately financial institutions start ailing rather than waiting until the damage becomes
irreparable. This contradicts the regulators role of protecting interests of depositors. Decisions to
wind up financial institutions is unreasonable and do tarnish the reputation of Kenya’s financial
institutions to the international community. Kenya’s economy being Africa’s powerhouse needs
to be jealously guarded. CBK is therefore obliged to consider proposals for injection of capital
in a bid to rejuvenate crumbling banks. The Central Banks must also tighten their vetting
process of the bank's top level management by conducting life style audits and of those
connected to them in collaboration with security agencies.

More stringent measures need to be put in place against perpetrators .The 'return the money'
policy is not effective in curbing corruption. We should focus on closing the loop rather than
asking perpetrators to return money and go scott free. Time is now to go beyond by freezing
assets of those firms and individuals implicated in the scam before the rotten fish contaminates
the entire system.
Ethics in the financial sector are vital for survival of the financial system. It is now evident that
fraudulent schemes of top level management pose substantial risk than fraud from customers,
robbers and bandits. CBK should be keen to ensure that ethical minded people are at the helm of
our financial institutions. Kenyans need to be reassured that their hard earned life savings are
safe in the banks. If this rot is not effectively dealt with, the public and our economy is doomed.


Read 787 times Last modified on Thursday, 27 October 2016 12:11
Published in Corruption

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