NAIROBI, Kenya, Mar 13 – The Kenya Commercial Bank (KCB) flagged fraudulent transfers of funds involving the Constituency Development Fund (CDF).
According to a report on Fraudulent Transactions on the CDF Accounts presented to the Decentralized Funds Account Committee of the Parliament, the deceitful activity was discovered in August 2012 when a customer failed to explain the source of funds deposited into their account at the River Road Branch.
“Upon reviewing the credits in the customer’s account, they identified a sum of Ksh.258,975.65 transferred on July 28, 2012, from the CDF Secretariat,” the report read.
“Further examination uncovered numerous other transfers from the CDF account to various beneficiaries, both within and outside KCB,” it added.
The transfers from the CDF Secretariat raised suspicions of fraud, prompting the bank to contact the CDF Secretariat to verify the legitimacy of these payments. The Secretariat later denied any knowledge of such payments.
Further scrutiny revealed additional fraudulent transfers from the CDF Board account to several recipients falsely represented as CDF suppliers, amounting to Sh39.56 million.
Investigations revealed that the QuickPay files in dispute were submitted via email by Michael Mutulili, a CDF official.
“Investigation uncovered that all disputed QuickPay files were submitted to the bank in the usual manner, attached to emails sent by Michael Mutulili, a CDF official, using his official email address, [email protected],” the report stated.
The bank managed to recover Sh7.33 million but still had a balance of Sh32.55 million to reclaim.
“The bank’s prompt action facilitated the recovery of Sh.5,609,703.35 from beneficiary accounts at KCB and an additional Sh.1,401,111.50 from bounced transactions, totaling recoveries of Sh.7,334,398.35. However, there remains a balance of Sh.32,551,552 yet to be recovered,” the report noted.
The case was promptly reported to the Banking Fraud Investigations Unit (BFIU) of the Central Bank of Kenya for further investigation to apprehend the perpetrators, with subsequent meetings and correspondence.
Both KCB Forensic and the bank concluded they were not liable for the losses incurred by the CDF Board Secretariat, as the transactions were processed with valid credentials and sent from an approved email account.
The responsibility for the security of the QuickPay database and email account integrity rested with the CDF Board as per the service level agreement signed between the Bank and the CDF Board.
No bank employees were summoned to court, and the bank wasn’t implicated in the criminal case.
The BFIU was urged to update on independent investigations and the criminal proceedings’ status.
The bank emphasized that the breach occurred at the CDF’s end, absolving it of responsibility. It pledged full cooperation with investigative authorities to conclude their investigations.
