In a long overdue reckoning for one of Kenya's banking industry scams, disgraced former Chase Bank Chairman Zafrullah Khan has been slapped with a fine of KES5 million for his key role in the fraudulent issuance and subsequent listing of a KES4.8 billion note 10 years ago.

In an update to the markets on Wednesday, the decision by Capital Markets Authority (CMA) marks a moment in the country's financial sector where the axe has fallen on the architect of Chase Bank Limited's (under receivership) sudden collapse in 2015.

CMA noted that Khan has also been disqualified from serving as a director or key personnel of any issuer, licensed or approved person in East Africa's biggest economy for the next 10 years.

"The CMA established that Mr. Khan, being a CBKL Board Chairperson, failed to exercise effective oversight over the management of CBKL leading to preparation and publication of false and misleading financial statements disclosed in the published information memorandum," the markets watchdog noted.

It added: "Mr Khan failed to cause disclosure of material information of his bonus payment in a supplementary Information Memorandum (IM), since the IM had already been published, and was conflicted in chairing and participating in the approval of his own bonus without declaring the conflict."

Disqualified

Also in the soup following the fraudulent issuance and listing of a KES4.8 billion note on 22 June 2015 just a year only for the bank to go under receivership on 7th April 2016 is former general manager Makarios Agumbi and ex-general manager corporate assets James Mwaura.

According to the CMA, Makarios Agumbi has been directed to pay KES3.5 million in fine and has further been disqualified from working as a director or key personnel of any issuer, licensed or approved person in the capital markets for a total of five years.

CMA established that Agumbi, "facilitated the production of false and misleading 2014 financial statements as published in the IM. Further, he unprocedurally paid the bonus in lump sum to Mr. Khan, contrary to the resolution of the board of directors."

Additionally, the former General Manager Corporate Assets, James Mwaura will be forced to settle KES2.5 million in fines even as he comes to terms with disqualification from serving as a director or key personnel of any issuer, licensed or approved person in the capital markets for a period of two years.

Attend training

What's more, the disgraced trio were directed by the markets watchdog to attend corporate governance training to enhance their chances for consideration for appointment as top management chiefs of any issuer, licensed or approved entity in the country's capital markets.

After the CMA okayed Chase Bank to issue a KES10 billion bond in 2015, the first tranche of KES4.8 billion was listed at the Nairobi bourse on 22 June 2015.

However, on 7 April 2016, the banking industry regulator picked Kenya Deposit Insurance Corporation as receiver for a period of one year, triggering the suspension of trading of the lender's bond from the Nairobi Securities Exchange on 8 April 2016. 

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