How KCB Bank Laundered $79m & Shs315m Using Illegal Tirupati Bank Accounts

KCB Bank is one of the biggest commercial banks in East Africa but latest court issues with Tirupati development (U) Ltd is set to taint its image INTERNET PHOTO KCB Bank is one of the biggest commercial banks in East Africa but latest court issues with Tirupati development (U) Ltd is set to taint its image

Arguably East Africa’s biggest commercial bank, KCB Bank is in trouble after a client in Uganda went to the high court of Uganda at Kampala (Civil Division) accusing the regional bank of breach of contract, negligence, fraud and money laundering.

According to court submissions, Tirupati Development (U) Limited (the plaintiff) says KCB Bank Uganda and KCB Bank Kenya from whom it had acquired a US$ 7,000,000 loan in 2012 created illegal bank accounts with her consent and used it to launder money.

Tirupati through her lawyers Aegis Advocates and Kirunda & Wasige Advocates say that in August 2016, KCB Bank ‘opened and operate two separate US Dollar-denominated loan accounts the names of the Plaintiff without the Plaintiff’s knowledge or consent.’

These were account number 1059906732 with KCB Bank Kenya and account number 2150226057 with KCB Bank Uganda. Also, in January 2017, KCB Bank Uganda opened and operated another new US dollar current account No. 2290351628 in the names of the plaintiff without the plaintiff’s authorization, consent or knowledge.

Tirupati says they never received any ‘coherent explanation’ for opening these ‘illegal’ accounts and when they demanded a reconciliation of accounts, clarity on the status of their loan repayments, and bank statements, none was honoured causing the plaintiff not to meet her loan obligations.

Inconsistent Loan Statements

Tirupati, between 2018 and 2021, wrote a series of letters to the banks raising several observed irregularities on its bank accounts including committed fraud and conspiracy to defraud. The bank failed to explain the inconsistent loan statements and balances observed by the plaintiff on her accounts.

Tirupati accuses the 2nd and 3rd defendants of misappropriating and occasioning the disappearance of the plaintiff's funds in the sum of US$ 995,466.78 deposited on the plaintiff's current accounts 2150226057 and 1059906732 to aid her loan repayments.

"The facts alleged above show that the 2nd and 3rd defendants on several occasions dealt dishonestly with the plaintiff by acting without the authority and knowledge of the plaintiff, failing to provide explanations for their actions and concealing information about the plaintiff’s accounts," Tirupati said in the plaint.

Fraud And Money Laundering

Tirupati also believes that the banks were using bank accounts they created in their names to launder money thereby exposing the plaintiff and its directors to the potential prosecution for money laundering.

The plaintiff says KCB Bank failed to manage the risk of financial crime and IT fraud when they maintained separate ledgers for the plaintiff’s accounts. Similarly, Tirupati says, the bank utilized her accounts in the manner that made any audit trail difficult to avoid scrutiny by regulators and law enforcement in Uganda and Kenya.

In this claim of fraud and money laundering, KCB Bank facilitated the unauthorized use of the plaintiff’s accounts to transact in varying amounts between 2014 and 2021 totalling US Dollars 79,900,000 and 62 similar transactions totalling UGX. 315,992,747 which transactions bore no relationship to the plaintiff or its businesses for the period evaluated but appear in the names of the plaintiff.

"The plaintiff avers and contends that the 2nd and 3rd Defendant continue to this day to launder money through her named accounts. These actions did and continue to expose the plaintiff, its shareholders and directors to the legal and financial consequences and sanctions arising from the suspicion of engaging in illicit money laundering and probable terrorist financing, likely corruption, or payments procured through drug or child and sex trafficking through the illegal use of her accounts threatening her entire business enterprise."

Tirupati Makes Demands

With this suit, Tirupati wants the court to declare that KCB Bank breached the loan contract, is a fraudulent bank, neglected its fiduciary duties, failed to manage plaintiff accounts, failed to manage the risk of financial crime, cause the bank to return 20 certificates of title, account for all sums misappropriated with interest, declare that bank engaged in money laundering, pay fines and general damages and costs of the suit.

Loan Contestations

While the two entities agreed on a USD 7,000,000, the bank disbursed USD 6,990,000. The bank charged US$35,000 as a loan negotiation fee, a thing the plaintiff says was irregular because it was above the agreed amount and the bank refused to provide breakdowns of how the loan negotiation amount charged was arrived at.

At the time, the plaintiff held only one account with the first defendant vide, Account Number 2201449317 registered in the plaintiff’s name. And as collateral for this facility, the plaintiff agreed to and did provide the 2nd and 3rd Defendants a series of certificates of title to its properties.

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