Post by Hasan on Nov 27, 2006 23:12:38 GMT 3
What is this so-called 'money laundering?'
The name of Charterhouse bank surprisingly popped up the other day in a speech by the US ambassador to Kenya, Michael Rannerbegger, delivered to the American Chamber of Commerce in Nairobi
While castigating the lethargy with which President Kibaki’s government has handled the so called war against corruption, the American envoy cited Anglo Leasing, Goldenberg and Charterhouse Bank as incidences of corruption that the government must address urgently.
The alleged Anglo Leasing and Goldenberg scams are undoubtedly a common tune to the ears of Kenyans. But the inclusion of Charterhouse Bank in this infamous list of shame came as a big surprise, especially to journalists who have been covering incidences of sleaze in the Kibaki era.
One would like to inquire into how Ambassador Rannebergger came to include Charterhouse Bank in the list of scams in the Narc era.
Little is known about how the bank acquired the tag of a scandalous institution, apart from a declaration made by the Central Bank of Kenya (CBK) to the effect that Charterhouse had been engaged in massive ‘economic crimes’ that include money laundering, hence the move by CBK to close it down.
The bank was also accused of assisting one its customers, supermarket chain Naukett, to evade paying taxes. How such a conspiracy can be executed is logistically puzzling.
But all these conceded, this turn of events calls to mind a principle held by Russian President Vladimir Putin.
As the former head of the Soviet era spy agency, KGB, Putin always believes that there are three sides to a story namely, your side, my side and the truth.
In view of this three dimensional approach to a story, the Central bank of Kenya has said Charterhouse Bank has been involved in economic crimes, accusations which the latter has refuted. The question then becomes, who between these two is not telling the truth?
But an analysis of a few jurisprudential principles may help shed light on the third dimension (the truth).
First and foremost, there is a so-called ‘economic crime’ with which Charterhouse Bank and several other unnamed institutions have been accused of. This crime is called money laundering.
But the strange thing is that this ‘crime’ has largely remained a journalistic crime.
As much as there could be an activity understood to be money laundering, legally there is no crime called money laundering. Neither the Anti-Corruption and Economic Crimes Act nor the Penal Code recognises any crime called money laundering. If Charterhouse bank is guilty of any economic crime, that crime must be stipulated under Section 45 of the Anti-Corruption and Economic Crimes Act or any other written law.
And this calls to mind a jurisprudential principle known as nullum crimene sine lege, meaning there is no crime without legislation.
To this end, it is legally erroneous for anyone to accuse Charterhouse Bank or any other institution or person of money laundering. Doing so can only amount to mischief intended to defame those thought to be engaged in such an activity, because no court of law would entertain such a charge.
In this regard, without giving any substantive reason, it is erroneous for CBK to cite money laundering as a reason to close down Charterhouse Bank because, in the spirit of null criminal sine loge, one cannot cite a non existent law to punish anyone.
Therefore, if Charterhouse has been closed because of money laundering, then such closure action is out rightly illegal.
If money laundering, whatever it is, were to be a crime, then the appropriate law formulating body, in this case Parliament, should be the one to criminalize it. And since CBK has no legislative powers, it cannot purport to accuse and punish anyone for money laundering.
Besides, even if today or tomorrow Parliament were to declare certain activities of Charterhouse Bank as a crime of money laundering, Charterhouse would still not be culpable of the offence because of the protection granted by section 77 of the constitution, which safeguards everyone from suffering liability of post facto laws.
Closely related to nullum crimene sine lege, the principle of post facto laws prohibits criminalization of an act after it has been committed and punishing someone retrospectively for it.
But the foregoing notwithstanding, there are other substantive issues between CBK and Charterhouse Bank that are still mind-boggling.
In a letter dated June 23, 2006, written by acting CBK Governor, Jacinta Mwatela, and addressed to the Chairman of Charterhouse, it says in part, in order to protect the interests of Charterhouse Bank Limited, its depositors and other creditors, the Central Bank of Kenya has appointed Miss Rose Detho as Statutory Manager for Charterhouse Bank pursuant to Section 34(1) of the Banking Act.
The letter further informs the addressee that the Statutory Manager would exercise all the powers conferred to her by the Banking Act and shall enjoy the rights and privileges of a manager in accordance with Section 34(2) and 34(6) of the Banking Act. While serving in that capacity, the Board of Directors of Charterhouse Bank would be excluded in the management process.
Now, while the powers of the Central Bank, under section 34 of the Banking Act, to intervene in the management of any commercial bank is not in dispute, the statutory manager in the event of such intervention is required by Section 34(4) to assume control and conduct of affairs of such an institution and discharge the duties conferred thereunder with diligence and in accordance with sound banking and financial principles and, in particular with due regard to the interests of the institution, its depositors and other creditors.
In discharging duties as statutory manager, such a person will have responsibilities that include tracing and preserving all the property and assets of the institution, recovering all debts and other sums of money due to and owing to the institution, evaluating the capital structure and management of the institution and recommending to the Central Bank any restructuring or re-organisation which he or she considers necessary, and which, subject to the provisions of any other written law, may be implemented by him or her on behalf of the institution, entering into contracts in the ordinary course of the business of the institution, including the raising of funds by borrowing on such terms as he may consider reasonable and obtaining from any officers or employees of the institution any documents, records, accounts, statements or information relating to its business.
A review of the foregoing responsibilities of a statutory manager reveals that placing a commercial bank under statutory management is by all means intended to revive it and make sure it proceeds with normal operations. In fact no commercial bank should collapse if placed under CBK statutory management.
But it came as a surprise that Charterhouse Bank was closed down barely days after it was placed under statutory management. It can only be assumed that the statutory manager had explored all options stipulated under Section 34(5) of the Banking Act to normalize operations of Charterhouse Bank.
But it is impossible to believe that within such a short time, the statutory manager had explored these options and found them unworkable to place the bank back to the right course, hence the decision to close it down all together!
By making a hasty decision to close down the bank, one can only conclude that CBK placed Charterhouse Bank under statutory management for reasons other than the one stipulated under Section 34(1) which are;
i. if the institution fails to meet any financial obligation, when it falls due including an obligation to pay any depositor,
ii. if a petition is filed, or a resolution proposed, for the winding up of the institution or if any receiver and manager or similar officer is appointed in respect of the institution or in respect of all or any part of its assets,
iii. if the auditor of the institution makes a report to the Central Bank under the provisions of subsection (4) of section 24,
iv. if the Central Bank discovers (whether on an inspection or otherwise) or becomes aware of any fact or circumstance which, in the opinion of the Central Bank, warrants the exercise of the relevant power in the interests of the institution or its depositors or other creditors.
For whatever reason legal reasons CBK intervened in Charterhouse Bank, it is still mind-boggling why the superior bank decided to close down the bank in such a haste. One would also question if closing down the bank was in the best interest of its depositors, creditors and the institution itself as required under section 34(4) of the Banking Act.
Therefore in the absence of a clear substantive reason to close down Charterhouse Bank, the management of Central Bank of Kenya need to explain to Kenyans, and especially the media, what really happened with the institution.
Financial journalists would also benefit immensely if CBK clarified what money laundering is. May be thereafter Parliament may enact appropriate law to criminalize activities thought to be money laundering.
But before that happens, no institution or person should be defamed by being accused of committing a non-existent crime called money laundering
By Hassan Kulundu
The name of Charterhouse bank surprisingly popped up the other day in a speech by the US ambassador to Kenya, Michael Rannerbegger, delivered to the American Chamber of Commerce in Nairobi
While castigating the lethargy with which President Kibaki’s government has handled the so called war against corruption, the American envoy cited Anglo Leasing, Goldenberg and Charterhouse Bank as incidences of corruption that the government must address urgently.
The alleged Anglo Leasing and Goldenberg scams are undoubtedly a common tune to the ears of Kenyans. But the inclusion of Charterhouse Bank in this infamous list of shame came as a big surprise, especially to journalists who have been covering incidences of sleaze in the Kibaki era.
One would like to inquire into how Ambassador Rannebergger came to include Charterhouse Bank in the list of scams in the Narc era.
Little is known about how the bank acquired the tag of a scandalous institution, apart from a declaration made by the Central Bank of Kenya (CBK) to the effect that Charterhouse had been engaged in massive ‘economic crimes’ that include money laundering, hence the move by CBK to close it down.
The bank was also accused of assisting one its customers, supermarket chain Naukett, to evade paying taxes. How such a conspiracy can be executed is logistically puzzling.
But all these conceded, this turn of events calls to mind a principle held by Russian President Vladimir Putin.
As the former head of the Soviet era spy agency, KGB, Putin always believes that there are three sides to a story namely, your side, my side and the truth.
In view of this three dimensional approach to a story, the Central bank of Kenya has said Charterhouse Bank has been involved in economic crimes, accusations which the latter has refuted. The question then becomes, who between these two is not telling the truth?
But an analysis of a few jurisprudential principles may help shed light on the third dimension (the truth).
First and foremost, there is a so-called ‘economic crime’ with which Charterhouse Bank and several other unnamed institutions have been accused of. This crime is called money laundering.
But the strange thing is that this ‘crime’ has largely remained a journalistic crime.
As much as there could be an activity understood to be money laundering, legally there is no crime called money laundering. Neither the Anti-Corruption and Economic Crimes Act nor the Penal Code recognises any crime called money laundering. If Charterhouse bank is guilty of any economic crime, that crime must be stipulated under Section 45 of the Anti-Corruption and Economic Crimes Act or any other written law.
And this calls to mind a jurisprudential principle known as nullum crimene sine lege, meaning there is no crime without legislation.
To this end, it is legally erroneous for anyone to accuse Charterhouse Bank or any other institution or person of money laundering. Doing so can only amount to mischief intended to defame those thought to be engaged in such an activity, because no court of law would entertain such a charge.
In this regard, without giving any substantive reason, it is erroneous for CBK to cite money laundering as a reason to close down Charterhouse Bank because, in the spirit of null criminal sine loge, one cannot cite a non existent law to punish anyone.
Therefore, if Charterhouse has been closed because of money laundering, then such closure action is out rightly illegal.
If money laundering, whatever it is, were to be a crime, then the appropriate law formulating body, in this case Parliament, should be the one to criminalize it. And since CBK has no legislative powers, it cannot purport to accuse and punish anyone for money laundering.
Besides, even if today or tomorrow Parliament were to declare certain activities of Charterhouse Bank as a crime of money laundering, Charterhouse would still not be culpable of the offence because of the protection granted by section 77 of the constitution, which safeguards everyone from suffering liability of post facto laws.
Closely related to nullum crimene sine lege, the principle of post facto laws prohibits criminalization of an act after it has been committed and punishing someone retrospectively for it.
But the foregoing notwithstanding, there are other substantive issues between CBK and Charterhouse Bank that are still mind-boggling.
In a letter dated June 23, 2006, written by acting CBK Governor, Jacinta Mwatela, and addressed to the Chairman of Charterhouse, it says in part, in order to protect the interests of Charterhouse Bank Limited, its depositors and other creditors, the Central Bank of Kenya has appointed Miss Rose Detho as Statutory Manager for Charterhouse Bank pursuant to Section 34(1) of the Banking Act.
The letter further informs the addressee that the Statutory Manager would exercise all the powers conferred to her by the Banking Act and shall enjoy the rights and privileges of a manager in accordance with Section 34(2) and 34(6) of the Banking Act. While serving in that capacity, the Board of Directors of Charterhouse Bank would be excluded in the management process.
Now, while the powers of the Central Bank, under section 34 of the Banking Act, to intervene in the management of any commercial bank is not in dispute, the statutory manager in the event of such intervention is required by Section 34(4) to assume control and conduct of affairs of such an institution and discharge the duties conferred thereunder with diligence and in accordance with sound banking and financial principles and, in particular with due regard to the interests of the institution, its depositors and other creditors.
In discharging duties as statutory manager, such a person will have responsibilities that include tracing and preserving all the property and assets of the institution, recovering all debts and other sums of money due to and owing to the institution, evaluating the capital structure and management of the institution and recommending to the Central Bank any restructuring or re-organisation which he or she considers necessary, and which, subject to the provisions of any other written law, may be implemented by him or her on behalf of the institution, entering into contracts in the ordinary course of the business of the institution, including the raising of funds by borrowing on such terms as he may consider reasonable and obtaining from any officers or employees of the institution any documents, records, accounts, statements or information relating to its business.
A review of the foregoing responsibilities of a statutory manager reveals that placing a commercial bank under statutory management is by all means intended to revive it and make sure it proceeds with normal operations. In fact no commercial bank should collapse if placed under CBK statutory management.
But it came as a surprise that Charterhouse Bank was closed down barely days after it was placed under statutory management. It can only be assumed that the statutory manager had explored all options stipulated under Section 34(5) of the Banking Act to normalize operations of Charterhouse Bank.
But it is impossible to believe that within such a short time, the statutory manager had explored these options and found them unworkable to place the bank back to the right course, hence the decision to close it down all together!
By making a hasty decision to close down the bank, one can only conclude that CBK placed Charterhouse Bank under statutory management for reasons other than the one stipulated under Section 34(1) which are;
i. if the institution fails to meet any financial obligation, when it falls due including an obligation to pay any depositor,
ii. if a petition is filed, or a resolution proposed, for the winding up of the institution or if any receiver and manager or similar officer is appointed in respect of the institution or in respect of all or any part of its assets,
iii. if the auditor of the institution makes a report to the Central Bank under the provisions of subsection (4) of section 24,
iv. if the Central Bank discovers (whether on an inspection or otherwise) or becomes aware of any fact or circumstance which, in the opinion of the Central Bank, warrants the exercise of the relevant power in the interests of the institution or its depositors or other creditors.
For whatever reason legal reasons CBK intervened in Charterhouse Bank, it is still mind-boggling why the superior bank decided to close down the bank in such a haste. One would also question if closing down the bank was in the best interest of its depositors, creditors and the institution itself as required under section 34(4) of the Banking Act.
Therefore in the absence of a clear substantive reason to close down Charterhouse Bank, the management of Central Bank of Kenya need to explain to Kenyans, and especially the media, what really happened with the institution.
Financial journalists would also benefit immensely if CBK clarified what money laundering is. May be thereafter Parliament may enact appropriate law to criminalize activities thought to be money laundering.
But before that happens, no institution or person should be defamed by being accused of committing a non-existent crime called money laundering
By Hassan Kulundu