An old corruption claim, wished away arrogantly by the management of Cooperative Bank has returned to haunt its planned acquisition of Jamii Bora Bank.
Over the years, the bank management have assumed that the fraud some its employees and insider trading during the first IPO in 2008.
A section of Cooperative Bank of Kenya clients and shareholders are raising questions over the safety of information technology (IT) systems at the bank after they lost money from their accounts under mysterious circumstances.
While the takeover of poor performing Jamii Bora is certain, questions about the efficacy of the bank’s internal system is one that the management led by Gideon Muriuki will be faced with in the coming days.
Several former employees of the bank are raining doubts on whether the bank should be given a chance to expand its foothold in the country, something that will bring it close to regional market leader KCB and Equity Bank.
A former employee who was sacked by the bank three years ago confides that Jamii Bora Bank is literally in the red and Cooperative Bank is going for nothing g but a paper purchase.
The woes bedeviling Jamii Bora saw the Kenyatta Family owned CBA bolt out of the last minute purchase of the second last ranked lender by shares standing at position 38 out of 39 commanding a paltry 0.12 percent with 17 branches for NIC.
Tongues are already wagging that the acquisition was one of the sweet deals brokered to let off the hook Cooperative Bank CEO Muriuki off the hook for money laundering related charges over the NYS 2 scandal.
The deal has been quietly brokered by Mt Kenya oligarchs to save one of their own a lifeline.
A collapse of the Jamii Bora bank would send wrong signals in the struggling financial sector.
It is to be recalled that one of the biggest clients of Jamii Bora bank is the struggling East Africa Cables, EAC, who owes Jamii Bora millions in debts. The Cooperative Bank CEO is one of the largest shareholders of the cable manufacturer through holding company.
Over the years, the internet has been awash with stories about client like Dina Mwangi, who on Facebook wrote: “Coop bank is a fraud. Approximately Sh13,000 vanished from my account mysteriously. I have been at the Upper Hill branch since noon and is now 3pm and I have not been helped. I am being shuttled from one inefficient officer to another. You are the most disgusting inefficient fraudulent bank ever.”
Another one, Esther Kasaya, wrote: “Honestly Coop Bank how can you make me go without salary for three days. Cant you tell us what is happening.
When I call you people you say the money is in my account, when I check the ATM nothing, when I queue inside the bank you tell me your system is offline, Kusema ukweli why are you making us look like beggars? Why?”
Antony Kimani’s account at the bank had Sh18 million, from which he withdrew Sh14 million. The bank said the money did not belong to him and went ahead to freeze the account, causing Mr Kimani to sue.
The Sh115 million the bank lost is said to have been siphoned by seven customers in 2011. The other customers were not named in the suit before High Court judge Fred Ochieng.
Justice Ochieng heard that all Kimani needed to siphon the money and use it for gambling online was his mobile phone. His account was connected to the mobile banking facility, meaning he could operate it remotely from his phone.
Kimani’s was a savings account where inflows were expected to be more than outflows. And when he was asked why the opposite was the reality, Kimani told the court he opened the account purely for gambling purposes. However, he never banked any money from possible wins.
But the bank system malfunctioned, preventing it from debiting Kimani’s account. And even though the system was not picking up debits, the credits were being received through a different route.
Edwin Karuri, a manager with the bank, told the court that on May 7, 2011, he started investigations that revealed seven customers transacted debits totalling Sh115, 869,566 over a period of eight months using credit cards. However, the same had not been debited from their respective bank accounts.
The bank later learnt the seven customers opened accounts at one branch after they were introduced by one of the bank’s employees.
“This led to suspicion that bank employees were aware of the malfunction in the bank’s system and had encouraged customers to take advantage of it,” Mr Karuri said.
He also said transactions were being carried out when the bank’s main operating software was offline, having been switched off. All the debits were in relation to internet transactions for gambling.
He added that Kimani carried out his transactions at night. But the judge found the claims untrue, saying gambling on the internet was not prohibited at the time so Kimani had no need to keep his activities secret.
Both the bank and its customer lost, as the judge dismissed the case. The court declined to order Kimani to refund the Sh14 million.
Some of the bank’s clients say at times the IT systems go down for hours affecting its card transactions and ATMs services.
At the bank’s Eldoret Branch, an employee was accused of stealing Sh40 million from customers who had invested in stocks under accounts he was handling.
The bank’s credit card section has also been hit by a systemic problem known to staff whereby when a customer conducts a transaction using their card, the credit and debit accounts are not settled in real time.
The bank staff then manipulates entries on the Credit Card Debit Suspense Account that has to be reconciled manually. Like many banks, Co-op Bank runs card systems, Bank Master and Trans Master, separately.
When the bank closes operations at the end of the day, the Bank Master goes to sleep, but the Trans Master that supports ATMs and connects the bank’s account-holders to international card system works 24 hours.
However, due to the bank’s malfunctioning systems, sometimes transactions from the Trans Master have to be entered manually on the Bank Master, according to information the bank provided to the Milimani Commercial Court in a case lodged against it by a customer the bank later accused of abusing its systems.