Kenya 'political' banks come under scrutiny: Complaints from IMF and aid donors prompt inquiry after export swindle

FOUR BANKS in Kenya are being investigated by a special audit ordered by the Central Bank of Kenya after complaints about the banking system voiced by the International Monetary Fund and Western aid donors.

Kenya's aid donors are deeply worried about the activities of so called 'political' banks in Kenya, which are believed to have close links to the political establishment, and have insisted they are investigated.

One of the banks under investigation, the Delphis Bank, is owned by the Dolphin Group of companies chaired by Lord Parkinson, the former Conservative Party Chairman.

On the orders of the Central Bank, investigators from Price Waterhouse will examine documents like those obtained by the Independent which show that on 2 April this year the Delphis Bank transferred 152m Kenya shillings (pounds 2.5m) to the Exchange Bank, one of the other banks to be audited, and that three days later Ksh215m (pounds 3.6m) was transferred back to Delphis from Exchange.

The four banks - Delphis, Exchange, Post Bank Credit and Pan African - are believed to be the channel for an inflow of Ksh24bn into the Kenyan economy last year, which derailed inflation and credit targets and caused a dramatic fall in the shilling.

One other bank, the Trade Bank, was closed by the government on 15 April and senior officials arrested pending further investigations. At the time the Minister of Finance, Musalia Mudavadi, denied allegations that banks with links to the political establishment had been allowed to run up overdrafts with the Central Bank.

Delphis Bank was formerly the Bank of Credit and Commerce International in Kenya but was bought by a businessman, Ketan Somaia, in late 1991 after the collapse of BCCI. Mr Somaia, a young enterpreneur close to Kenya's poltical leaders, is the president of the Dolphin Group and last year he persuaded Lord Parkinson to act as chairman of his company. Lord Parkinson, who first met Mr Somaia when he was MP for Hertsmere, is understood not to take a fee for his role. Earlier this year he went to Dubai for a one-week briefing on Dolphin and then flew to Kenya where he met President Daniel arap Moi.

Dolphin has interests in Kenya, India, the Middle East and Britain. It recently moved its base to Dubai and moved its registration from the Isle of Man and Guernsey to Bermuda. These offshore registrations allow the company to disclose only a minimum amount of information about its activities.

The Exchange Bank is owned by Goldenberg International Ltd, the Kenyan company whose multi-million-pound swindle based on the fictitious export of diamond jewellery was revealed in the Independent yesterday. For a time the Delphis Bank acted as bankers for Goldenberg, providing an export credit for diamond jewellery to Switzerland.

Asked about a letter confirming this assistance, a spokesman for the Delphis Bank in Nairobi said the two employees who signed the letter in April last year had left the company but their departure had nothing to do with the case. He said the Delphis Bank had asked Goldenberg to close its account as it was no longer being used.

According to customs documents submitted by Goldenberg to the Kenyan Central Bank, it has exported pounds 50m-worth of diamonds and jewellery to Switzerland and Dubai in the past two years. The Minister of Finance claimed in March that these exports had earned Kenya more than Ksh9bn. But the latest annual Economic Survey of the Kenyan government does not mention diamond jewellery or gold as exports and says almost nothing was exported to Switzerland in 1991.