Questions raised as Dubai Bank’s clients fail to claim deposits

By: DENNIS ODUNGA

Questions were raised on Tuesday on the true identity and authenticity of Dubai Bank customers as 7,200 depositors failed to turn up to claim their deposits.

Appearing before the Senate Finance Committee, Central Bank Governor Patrick Njoroge agreed that the lack of interest has raised concerns about the sincerity of their transactions with the bank.

“Money is something we are used to. Why is it that the depositors are not coming forward? There may be something else going on. But, we have solid evidence that can withstand legal scrutiny,” said Dr Njoroge.

Dubai Bank was closed on August 24, barely a week after being put under receivership on the basis of “violations of banking laws and regulations, including failure to maintain adequate capital and liquidity ratios as well as provisions for non-performing loans and weak corporate governance structures.”

“MONEY LAUNDERING”

A call was then made to customers to come forward and claim Sh100,000 and below.

According to the governor, only 561 out of the 7,700 depositors have responded.

Kajiado County Senator Peter Mositet expressed fears that the lender may have been involved in money laundering, terrorism and drug trafficking deals, given that most of them are reluctant to present themselves to the bank.

“It is shocking that 7,200 depositors have not appeared. Maybe this was a bank used to clean money from shylock companies. Can you use the security personnel to get these people?” asked Mr Mositet.

Dubai Bank was put under receivership on August 14, this year, due to capital and liquidity issues that culminated in its inability to meet its financial obligations.

Dr Njoroge said due diligence undertaken by the Kenya Deposit Insurance Corporation (KDIC) appointed by Central Bank, indicated that Dubai Bank was completely insolvent, hence the need for liquidation.

At the time of placing the bank under receivership, it was ranked as the smallest lender in Kenya, with a market share of about 0.1 per cent.

“The decision was taken to protect the interests of depositors, creditors and members of the public,” Dr Njoroge told the Senate Finance Committee, chaired by Mutula Kilonzo Jnr at County Hall, Nairobi.

SOUND PRACTICES

He called for patience, saying forensic auditors and the bank fraud investigations department were handling the matter as they improve the way they supervise banks.

The governor said though Imperial Bank was also placed under receivership on October 13 due to fraudulent activities and failure to adhere to sound practices, there are efforts to reopen it.

Dr Njoroge said there was shock in the banking sector when the banks collapsed, to an extent that some depositors withdrew their money in fear that a similar fate would befall other institutions.

On the way forward, the Central Bank chief said investigations were going on to expose fraud and other forms of malpractice in the banking sector.

Dr Njoroge said the exercise would go beyond just looking at the financial accounts of the banks to interrogating data in a bank to ensure they don’t just take anything at face value.

He admitted that supervision has been wanting and there is need to change the approach to save more banks from collapsing due to malpractices that could have been prevented, long before they happen.

The governor, however, sought to assure depositors that they will not lose their deposits even after banks were put under receivership due to deficiencies that make them unable to meet financial obligations.

SOURCE: DAILY NATION