Tuesday, September 07, 2010

Charterhouse bank - the money-launderer's dream bank

Charterhouse bank cost a CBK governor (Andrew Mullei) his job. It also led his obvious successor, Jacinta Mwatela missing out on the job. Several people involved in investigating the bank either had to flee for their lives or their careers were ruined. Its crimes:
  • Money laundering: In any story you read about money laundering in Kenya, one of the best examples you get is that of Crucial properties which held a foreign currency account with Charterhouse bank. The company owned by among others Humphrey Kariuki (Wines of the World; Dalbit Petroleum and I think former proprietor of Green Corner in Nai) was investigated by CBK after it received $25m from either Leichstein or Jersey (depends who you ask). CBK reckoned this was drug money. Charterhouse refused to provide details and the whole thing went to court. The judge allowed Charterhouse to go scot free. In the meantime, the CBK team doing investigations discovered that Charterhouse had like 200 customers with 20,000 accounts. Many lacked basic know-your-customer information, but were clearly opened for the the purpose of layering where you disguise the source of your money by making multiple transactions into different accounts. That money-laundering only became illegal in Kenya this year is neither here nor there. When CBK delved it discovered the following other crimes none which have ever been successfully prosecuted because CB and related players pay well.
  • Tax evasion: Charterhouse helped Nakumatt (had a 10% stake in CB), to effectively under-declare it sales which meant that its tax payments to GoK were something like Ksh50m compared to Ksh500m for the smaller Uchumi! Effectively, Nakumatt and associates had not paid taxes amounting to Ksh18bn going by the CBK findings. How? Suppliers were paid into their CB accounts where they would either ship the money abroad or shift into several other accounts within CB. When KRA came, it started chasing the account holders. Those cases are still pending.
  • Large exposure breaches: Means nothing to most of us, but most banks that have either been conduits of crime or played with the idea of collapsing always do so because they breach larg exposure requirements. In layman terms, no one customer should more than 25% of a bank's loans or deposits. Reason being, if the customer collapses and goes to heaven tomorrow, the bank will more or less follow (though presumably not to heaven). Nakumatt and associates probably did something like 50% of all CB's business. CB also broke banking rules on lending to employees;
Why did Charterhouse survive to awake now as its threatening to do? The owners of CB are well connected characters.

Fuller details here.

44 comments:

Samora said...

Very insightful man... keep it up

naila1 said...

this will forever remain a puzzle to most of us,what was the basis to accuse the bank for money laundering yet there was no law on money laundering when it was closed.secondly if you have been up to date with current news kenya revenue authority has cleared the bank over any tax evasion.Deputy solicitor general muthoni kimani said there is actually no legal reason to keep the bank closed.with no evidence at hand its best the bank resumes operation both for our economy and the depositors who have been denied services and access to their money since 2006

NINA said...

It is funny how we easily find ourselfs caught up in such big mans circle. the question i would really like to ask you is what facts do we have concerning the so called 'money launderer's dream bank. do we have any evidence that the bank itself did launder money or is it the Bank's custtomers. and if CHB HELPED NAKUMATT evade taxes, then why is the supermarket in question still in operation?

MainaT said...

Naila1-the moneylaundering was illegal argument reminds me of somebody who recently told me that it was okay for the former president's regime to torture because Kenya was a one-party state.
At a basic banking level, Charterhouse broke "know your customer" rules. It broke large exposure rules.
Imho, the problem with Charterhouse/Nakumatt is that enough key decision makers have been bribed, but because a crime/s have been committed, somebody somewhere had to take a stand. Which where the US comes in.

MainaT said...

Nina-please read my article. It says Charterhouse facilitated moneylaundering. The bare evidence is there in that you had customers with upto 80 bank accounts in the same bank!
Ksh40bn was involved effectively making a bigger scandal than Goldenberg. Some of those proceeds bought key decision makers.
Hence why Nakumatt a supermarket 10 times that Uchumi has in the past paid a third of the taxes Uchumi pays.

NINA said...

Maina T- how can you prove that the key decisions makers were bought? you have no proof. this is the way people like just spread rumors and that way the weak kenyan at the grassroots end up loosing evrything, in this case their money in the bank.
secondly tell me which bank you have opened accounts with and they have asked for utility bills from you, if any only a few banks do that which means, most banks should be closed because they do not follow the Know your Customer well rule.
thirdly when did this know your customer well issue come up and the money laundering bill too...was it there in 2004?? you cannot backdate a law. it is only effective from the date it was passed.
fourth, the bank cannot investigate depositers, all it can do is to forward abnormal account movements to the relevant authorities, but at this time there was nothing to measure what was abnormal or normal money transfers in this case- proper definition of money laundering.

Kwach said...

Samora, I think the lady has spoken some sense Its time we stopped being romour mongers and and playing the role of detectives. What is the work of a Bank? We saw the situation of Mike Sonko our latest kid on the block. when the government noted the irregularity's with his accounts did they close the bank?????????????? over to you....

MainaT said...

Nina,
Thanks for the passionate defence of CB. Nowadays I keep this blog so I could debate with fellow Kenyans and other interested parties. If I can respond to your 4 points blow by blow
· Evidence of bribery: As we many forms of thievery, nobody shouts about bribery. However, the question I’ve asked severally is this? How does Nakumatt with turnover almost 10 times that of Uchumi pay tax to GoK ten times smaller than Uchumi? Why haven’t all the pending cases against Nakumatt, Kingsway and others on tax evasion not been brought to court? The amounts put forth total Ksh18bn according to CBK.

· Know your customer and lack of the same at CB: On this link here, please have a document called Charterhouse 1.doc http://wikileaks.org/wiki/Charterhouse.zip. Key quotes “CB has developed some KYC procedures that require prospective customers to supply certain information and to complete account opening forms which are then approved before an account can be opened. We however noted that these procedures are largely ignored.” Or “Of the 1,004 accounts we sampled for review, there were no account opening forms or customer instructions for 839 accounts (representing 217 relationships).” And “most were incomplete”. Really Nina.

·Irregular transactions: It’s very easy to monitor and pick up irregular account transactions if you want to. Again, the list of unusual transactions is huge in the case of CB. Take Creative Innovations. It was paid Circa ksh800m a lot of going back and forth via a Paolo Sattanino. Creative was owned by among other Kingsway Tyres.

MainaT said...

Kwach- no rumours. If I may, let me suggest that you read the facts as represented on wikileaks about CB (link at the bottom of the main post).
Some of CBK guys working on the CB have had to flee Kenya.
Ksh40bn is something that our economy could do with very well.

bonnie said...

MAINA T, as the lady Nina has said there is no way of proving politicians and key decision makers were bribed to defend charter house bank, if any individual has evidence of the same, that individual should forward that evidence to relevant authorities for prosecution of culprits.
secondly, the fact that Uchumi paid taxes 10 times more than Nakumatt has nothing to do with the bank, when a company is "limited" it means it is a separate legal entity from its owners and other parent companies. e.g you can sue the government of Kenya because of an injustice caused to you by city council of Nairobi.

bonnie said...

maina, I like the fact that your article is well written and somehow researched, but please cite some of the sources of your information?
example on the customer who had upto 80 accounts in the same bank.
two, would you please quantify what are abnormal transactions in a corporate account with a gross turnover of over half a billion??

MainaT said...

Nina/Bonnie-Lets step back for a minute. Might save the ding-dong. Having read the evidence provided on the main, are you saying you believe that CB was wrongly accused:
1.Of violating KYC rules?
2.Breaking CBK’s related party transaction rules
3.Aiding tax evasion by Nakumatt and others contrary to Section 392 of the Penal code
4. Aiding and abetting activities contrary to the Economic crimes Act of 2003
5.Aiding and abetting money laundering. As I said, just because Kenya wasn’t a multiparty state in the 80s doesn’t justify moi torturing and maiming those who wanted to create own political parties.

It might be that Mullei wanted prudential banking, but the decision-makers wanted proper banking.

senorita said...

charter house bank is a mystery I do not understand why it was supposed to be closed yet it was its customers who were involved in money laundering.Why is nakumatt still in operation?.why were its clients not given back their money?and who is fooling who?before we say something we should always look at he facts.and to me charter house bank should e reopened

senorita said...

charter house bank is a mystery I do not understand why it was supposed to be closed yet it was its customers who were involved in money laundering.Why is nakumatt still in operation?.why were its clients not given back their money?and who is fooling who?before we say something we should always look at he facts.and to me charter house bank should e reopened

MainaT said...

Senorita-well the FACTS are that apart from depositors (who are understandably emotional about not getting their funds), anybody else reading even high level summary in yesterday's Nairobi Star newspaper would recommend that Charterhouse is closed down for good.
The Star story is summarised here http://allafrica.com/stories/201010020143.html.

John said...

i don't understand why we need to keep accusing charter house bank of malpractices and yet we have no sufficient evidence.. whoever thinks he has the evidence should go to court, otherwise let the bank operate. customers are suffering due to freezing of their accounts. Parliament should let charter house bank operate..

MainaT said...

John-the evidence is fairly overwhelming as to the guilt of CB.
The question is whether the decision-takers on CB, Nakumatt et al's crimes can take those decisions with integrity and professionalism. To do so would mean recovering lost tax revenues and closing down CB for good

kwach said...

Maina am in shock that you, being as informed as you seem want us to take gata press as evidence. An article that has been written by somebody relying on hearsay???? My friend since you seem to have some info like our dear friend Renneberger please do Kenyans justice and go to the committee that is seating in parliament and provide your evidence. stop entertaining Kenyans with hearsay. You will help us very very much. Tupe haki yetu!

kwach said...

PLEASE SEE MY COMMENTS BELOW:-
1.Of violating KYC rules? EVERY OTHER BANK DOES IT AND IS FINE
2.Breaking CBK’s related party transaction rules PLEASE PROVIDE EVIDENCE
3.Aiding tax evasion by Nakumatt and others contrary to Section 392 of the Penal code CHARTERHOUSE BANK IS NEITHER AN AUDITING FIRM NOR IS IT KRA. HOW IS THIS POSSIBLE
4. Aiding and abetting activities contrary to the Economic crimes Act of 2003 BANKS IN THE UK AND USA THAT HAVE FOUND GUILTY OF AIDING IN TRANSFERING FUNDS FOR SOME OF THE GRAVEST TERRORIST ACT LIKE 911 ARE STILL IN OPERATION.WHAT DID CHARTERHOUSE BANK DO?
5.Aiding and abetting money laundering. As I said, just because Kenya wasn’t a multiparty state in the 80s doesn’t justify moi torturing and maiming those who wanted to create own political parties.MY DEAR STOP GETTING HE-MOTIONS. LETS SEE FACTS ON PAPER

FOR THE LONGEST TIME WE KENYANS HAVE BEEN ASLEEP. WE ARE AWAKE NOW!!

MainaT said...

Kwach for your answers. My hope and prayer is that this blot on Kenya's banking landscape will be shutdown for good with depositors getting there money

NINA said...

@maina with all that researched info from Kwach and you still dont see the sense of it? i must admit that i really pity you, its sad that having done the research you have and finding no tangible evidence on the bank and you still want the bank closed!! i wonder for what reason. i pity you because you are following malice as facts. otherwise i would want you to let me know what you know that is fact on why you so much beleive the bank should remain closed. note: not anything malicious, but tangible evidence

senorita said...

why is charter house bank such a big fuss.catch the culprits who were the customers and let the bank resume its operation

senorita said...

Imagine an innocent customer who banked the money with charter house bank hoping to pay school fees.if a bank can be closed without even repaying its customers then how safe is our money really

MainaT said...

Nina-Kwach has not provided any evidence to counter the overwhelming evidence against CB. Kwach has a view that CB is innocent. That is Kwach's prerogative. After all, OJ was found innocent...

Senorita- closing CB will allow its "innocent" depositors a chance to get their deposits back mara moja.

MainaT said...

More rumours from the gutter press. Daily nation Page 2 has excerpts on the lending over the 25% limit; non reporting of foreign currency transfers.

kwach said...

Its Amazing how you are taking advantage of Kenyans who usually got no idea of the whole story. for me the gutter press story unfortunately...... we can not back date the money laundering laws if there was any money laundering. Why are they not telling us where the money came from? They are very "informed" CIDs. wamesoma sana.....

kwach said...

Mr Administrator my reason for engaging with this website was because I believed it was out to inform the kenyan Public on the real and debatable issues affecting our social, economical, and political environment. WHAT MESSAGE ARE WE PASSING BY DELETING OTHERS COMMENTS. Honestly!!!!!!

senorita said...

Fahari wawili wa kipigana nyasi humia” is a popular swahili saying that means that when two bulls fight it the grass that suffers .This is exactly what happened with the charter house bank four years ago, when it was mysteriously closed down. No one ever considered the faithful customers .those who had entrusted their monies to this bank. People, who were saving for the future, may be to buy a house or to pay for school fees four years down the line the poor customers still are wondering and still asking how safe our money in any bank is if all banks are mysteriously closed without informing their customers or giving their money back.
But the most mysterious thing about it all was the dubious reasons given for its closure. Charter house bank was accused of many reasons one of them being money laundering which by then was not illegal in Kenya.Money laundering act was only put to effect in last year.
The other reason given for its closure was tax evasion. It was said that some of its clients were evading paying taxes in this case they referred to Nakumatt. The question therefore is, why were the client not charged? In fact they have been in operation since then. It was not the bank in question that had evaded paying taxes.
3rdly, Charter house bank was accused of not knowing their customers well. well ,I own accounts in two very prestigious banks and one thing I know none of them gives a damn as to where I get my money from all they care is that I am their customer and that I bank with them.
My opinion is, let us not oppose something without fact because the facts to me are clear. That someone somewhere wanted charter house bank closed badly and they had to look for dubious reasons to do it. If not how comes that all those parties KRA being included now claim that charter house bank was innocent. I have been following this case well and one thing is clear to me charter house bank is INNOCENT and should be reopened.

senorita said...

I always find it mysterious any time something happens in Kenya and immediately the America through Ranneberger take their stand. It always makes me wonder what their interest is this time round. To me the west will always be the colonizers. People who only care when their interests are interfered with and that is why when Ranneberger took side and ultimately declared that charter house bank should remain closed. Something felt sinister and I began to ask questions.
Charter house bank was closed four years ago without repaying back money to its clients. It cost the governor then Andrew Mullei his job and his obvious successor Jacinta mwatela missing out on the job. Also, any parties involved in investigating about this bank either went missing or lost their jobs. The question to me therefore remains if the reasons for its closure were genuine how comes Andrew mulei refused to testify. Also all, the parties that found charter House bank guilty closed now claim that charter house bank is not guilty. Also, any time a bank closes the customers are supposed to get back their money within 90 days which was not so in this case. The customers up today have not been compensated.
The reasons for its closure also leave a lot to be desired. It was accused of tax evasion. Its clients were big names who were accused of not paying taxes. Nakumatt which is larger than Uchumi was paying 50 million compared to Uchumi which was paying 500 million. The question still is why is Nakumatt still in operation?
Secondly it was also accused of not knowing its customers well .which makes me wonder how many banks take time to know their customers well. All the reasons given for the closure of charter house bank to me are not sufficient enough for its closure .let the bank get opened if found guilty of any crimes accused then let it be fined. Punishing innocent Kenyans is not the way to go.

Joseph Kipkorir said...

what is Ranneberger's or america's interest in this matter?Ranneberger should be concerned more about crime in the US.We are no an American colony.All stakeholders have pointed out that there was no wrongdoing by the bank.Pricewaterhouse coopers didnt find any irregularity.The central bank and the treasury have been unable to pinpoint any mistake.What does Ranneberger want.Obama should recall this madman who is now engaging in personal fights.He seems to understand little about diplomacy.

Moses J.Onyancha said...

Those who were behind the closure of the bank were asked to produce the evidence of their allegations and they failed.The falsehoods that were advanced were based on mere malice and the allegations were found to be without basis.Investigations and scrutiny by the pricwaterhouse coopers has proved that there was no wrongdoing that could warrant the closure of the bank.look for facts,dont rely on rumours and propaganda.

Kwach said...

The bible says the truth has a way of coming out. MainiaT have you been reading Newspapers/ Wikileaks/ Listening to Radio BBC, kameme, coro and others from local to international/watching Television. We know quite a bit about what your Friend Ranneburger thinks about us aNd where his interests lie. I hear the next big release is on the American banks ROT! I am very ready because I can assure you it will Be a case of A MAN DRINKING WINE(in the name of Kumikumi) BUT PREACHING WATER

monica kabue said...
This comment has been removed by the author.
crystal kimara said...

senorita doroda thanks for your short story it has made me see the other side of the story of charter house bank and many people should read your piece

crystal kimara said...

senorita you are one of the few people who have actually gone beyond what is told by the news paper to finding your own view i like it keep it up

Alan said...

I believe that no matter the reasons for the closure of charter house bank it should be reopened so that the customers can get thier money.kwach and senorita you shold try to create awarenes to ignorant people like maina t

senorita doroda said...

maina t.if your so called facts are true how comes nakumatt and kingsway are still in operation yet they were the real culprits.look at the classic example of mike "sonko"why was the bank not closed yet he had so many accounts.and as for knowing your customer does your bank even know you.let as all look at real facts not myths.

NINA said...

since maina t is so quiet i think he sees the sense we are trying to make him have,,,,you cannot have a bank closed for all those years with no evidence at all...thanx senorita for your story,,,you just said all that i needed to say.......

senorita doroda said...

Haha nina i hope so too.

dennis said...

senorita whatever you wrote about shows me two things one of them is that there are always to sides of the story thank you for the good work

senorita doroda said...

I am glad that crystal and Dennis have read my story and got to see the other side of the story.let us enlighten other Kenyans so that we can eventually have justice and the clients get to have their money

beesting05 said...

In the interest of truth, the U.S government put an embassy in Kenya to protect U.S interests and not African interests leave alone Kenyan interests. So in all fairness let’s not blame Ambassador Michael Ranneberger for strongly opposing the opening of charterhouse bank because that is where the U.S interest lies.

senorita doroda said...

When the government discovered irregularities in mike sonko accounts they did not close the bank. They instead dealt with the client. And to me that begged for questions as to why they not did the same with charter house bank. When they discovered that its clients especially Nakumatt and kings way were evading taxes Instead it led to the closure of charter house bank without considering the rest of the clients. Is this fair?
This also not the first bank to violate the banking rules. Banks do so all the time and are only taken to court not closed down. And actually the only banking rule that charter house bank broke was that they did not know their customers well. How well do the banks we operate know us don’t all thay care about is our money so to me this is not a valid reason to keep the bank closed.
Lastly charter house bank was accused of money laundering which even if it did was not illegal then?
“Akuatafutiaye kosa atalipata” is a popular swahili saying that says that if someone wants to fault will find a reason anyway. And to me the question that I want to know is not why charter house bank should not be reopened but who really wanted charter house bank closed yet it was innocent in all this and what were his or her motives?

MainaT said...

Nina et al. Read my comment on October 11th. Haven't seen any new facts to make me want to change the original post.

CBK needs to close-down Chatterhouse so that so-called innocent depositors can get their cash back.