(NAIROBI, KENYA) – NCBA Bank has challenged the decision by Director of Public Prosecutions Renson Ingonga to prosecute its chief executive officer John Gachora for allegedly failing to report suspicious transactions linked to the KES363.3 million ($2.52 million / £1.98 million / €2.34 million) fraud at First Assurance Investment Ltd.
Mr Gachora and the bank argue that the charges are based on a flawed interpretation of the Proceeds of Crime and Anti-Money Laundering Act (POCAMLA) and its regulations. The bank says the DPP has failed to identify any provision of the law that creates personal criminal responsibility for a CEO over alleged regulatory failures by a bank.
It argues that the prosecution is effectively seeking to impose criminal liability on Mr Gachora merely because he occupied the position of CEO, without identifying any personal act, omission, participation, knowledge or criminal intent on his part. The bank said in court papers that the charges are founded upon a manifest error of law that goes to the root of the prosecution.
The High Court has since suspended the prosecution of Mr Gachora. The matter is scheduled for further directions on 27th August.
Mr Gachora is among three bank CEOs targeted by the DPP over the alleged fraud. KCB Bank Kenya CEO Paul Russo and Co-operative Bank CEO Gideon Muriuki have also obtained court orders stopping their prosecution. The three are accused of failing to report suspicious transactions involving alleged proceeds of the fraud at First Assurance Investment Ltd.
Mr Gachora argues that POCAMLA places the obligation to report suspicious transactions on a reporting institution through its designated Money Laundering Reporting Officer, rather than on the CEO personally. The bank said the central issue is whether the statutory obligation alleged to have been breached is one imposed by POCAMLA and the regulations made thereunder.
NCBA says its obligations under the law were discharged through its compliance framework, including the designated Money Laundering Reporting Officer appointed under Regulation 34 of the POCAMLA Regulations, 2013. The bank says the prosecution is an attempt to enlarge criminal liability beyond what Parliament intended.
The court papers state that NCBA complied with the bank’s statutory obligations under POCAMLA through its designated compliance and reporting structures.
NCBA has also given details of how it handled the First Assurance Investment account, arguing that it followed the required banking and anti-money laundering procedures. The bank says a banker customer relationship existed between it and First Assurance Investment and that it operated the account in accordance with the customer’s mandate and applicable laws.
On 21st March 2018, the bank received documents notifying it of changes in the company’s directorship and signing mandate, including the appointment of Salim Mohamed Busaidy as a director and authorised signatory.
NCBA says it conducted the required Know Your Customer, customer due diligence and enhanced due diligence procedures before making the changes. Mr Busaidy was identified as a politically exposed person because he was then a member of the Lamu County Assembly, prompting the bank to obtain the necessary internal approvals.
The account subsequently received several inward RTGS transfers, including KES9.1 million ($63,000 / £49,600 / €58,700) on 16th July 2018, KES18.75 million ($130,000 / £102,000 / €121,000) on 19th June 2019, and KES22.3 million ($154,000 / £122,000 / €144,000) on 3rd April 2024.
Between May and June 2024, the bank also honoured several cheques after confirming that they had been signed by the two authorised signatories as required by the account mandate. It says two other cheques, numbers 255 and 257, were rejected because they lacked both required signatures.
NCBA maintains that the transactions were processed in the ordinary course of banking business and in accordance with its internal policies and the customer’s instructions. It says it did not identify any suspicious activity that required the filing of a Suspicious Transaction Report.
The criminal case centres on allegations that Mr Busaidy stole KES363.3 million ($2.52 million / £1.98 million / €2.34 million) from First Assurance between 18th May 2018 and 30th April 2024 by accessing company accounts at NCBA, KCB and Co-operative Bank.
The DPP alleges that Mr Busaidy forged the signature of his co-director, Lamu governor Issa Abdalla Issa Timamy, on cheques used to withdraw the funds.
Mr Busaidy has denied 120 charges, including conspiracy to defraud, stealing, making documents without authority and acquiring proceeds of crime. He was released on a KES3 million ($20,800 / £16,400 / €19,400) cash bail or a KES10 million ($69,200 / £54,500 / €64,500) bond with one surety. The trial has since been suspended.