Massive fraud at local bank, millions lost

A systems glitch led to massive internal fraud at the financial institution, which cost the KRA and the Interior ministry

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A local bank with operations in over twenty countries lost hundreds of millions of shillings in ensuing confusion after changing its core banking system eight years ago.

The financial institution’s move to improve its internal control system instead resulted in massive fraud, with millions of shillings paid by clients as tax for over five years disappearing without a trace.

Over five thousand clients remain unaware of the status of their tax positions during that period, although several people have been prosecuted for theft of the millions of shillings from the bank.

The confusion caused an accumulation of unclaimed funds amounting to over nine hundred million shillings left in the institution’s suspense accounts after some technologically-laggard clients continued to use manual tax filing instead of the iTax system.

The bank and its staff were unable to differentiate between its assets and clients deposits but also breached its fiduciary banking responsibility by writing off its losses using the unclaimed funds to sex up its books.

A bulk of the funds had been paid in as income tax and Value Added Tax to the Kenya revenue Authority (KRA), and as fees to the Interior Ministry.

While customer instructions remained unprocessed, instances of duplicate processing – or lack of it – caused further confusion in outward clearing, inward clearing, sundry payments, bankers cheques and suspense accounts in the bank’s processing ledger accounts.

The Nairobi Law Monthly is still doing its due diligence on this story and shall be publishing a comprehensive investigative piece next month. (

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