On July 10, the Equity Bank Ltd Internal Control Department detected a series of suspicious transactions involving the bank’s salaries account.
A total of 47 withdrawals were made from this account, with the funds quickly transferred to multiple accounts in other banks.
Normally, when such transactions occur, there is a communication process between the involved banks known as corresponding credits, which ensures that both sides of the transaction are verified and above board.
However, in the case of these 47 transactions, there were no corresponding credits from Equity Bank, making it appear as if the funds had appeared out of nowhere.
This anomaly raised suspicion within the bank’s internal controls team, prompting a review of the transactions.
It was soon discovered that Equity Bank, Kenya’s second-largest financial institution by asset base, had been defrauded of Ksh. 1.5 billion, funds intended for employee salaries and other emoluments.
The bank’s head of security, Kevin Mwangi, reported the matter to the Banking Fraud Investigation Unit of the Directorate of Criminal Investigations (DCI) on July 11.
Preliminary investigations revealed that the credentials of David Machiri Kimani, the bank’s manager at the Group Processing Centre, Salary Processing Unit, had been used to process the fraudulent transactions.
This occurred while Mr. Kimani was on leave, and given that he possesses a valid passport, he quickly became a person of interest in the ongoing investigations.
On Sunday, Mr. Kimani was arrested at his home in Thogoto, Kiambu County, by a group of armed men.
Later that night, another group of armed men raided the Mathioya residence of Mr. Kimani’s father, Peter Kimani Machiri, further intensifying the investigation.
Security footage from the Machiri family shows the abductors with their faces covered, disconnecting electricity to the house before forcibly taking Mr. Machiri.
Court documents reveal that the fraud scheme was orchestrated at Britam Towers, involving multiple units within the bank.
Most of the accounts that were credited with the stolen funds were newly registered, and the money was quickly transferred to other accounts and withdrawn to avoid detection.
The DCI suspects that the businesses tied to these accounts were specifically created to facilitate the laundering of the stolen funds.
The DCI’s Banking Fraud Investigation Unit sought court permission to detain Mr. Kimani for 21 days as investigations continued, citing the risk to investors’ and depositors’ savings.
However, the court granted him bond. The investigation is focusing on money laundering and theft by a servant, with the DCI expressing concerns about the economic sabotage caused by the fraud.
The case highlights the major security challenges faced by financial institutions in Kenya and raises questions about the efficacy of internal controls and oversight mechanisms within these institutions.
It remains to be seen how deeply this fraud impacts the integrity of Kenya’s financial system.
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