One of Kenya’s largest banks is facing uncomfortable questions after investigators uncovered how more than Sh1.55 billion linked to a donor-funded government programme allegedly flowed through its systems with little apparent resistance, exposing what critics describe as a catastrophic failure of banking oversight.
At the centre of the scandal is Co-operative Bank of Kenya, the financial institution that held the operational account of the Rural Outreach of Financial Innovations and Technologies (PROFIT) programme, a joint initiative financed by the Government of Kenya and the International Fund for Agricultural Development (IFAD), a United Nations agency tasked with fighting rural poverty.
The programme officially ended on December 31, 2019. Yet years after its closure, the account remained active and became the alleged conduit through which more than Sh1.379 billion was fraudulently released from the National Treasury using forged payment vouchers and fictitious expenditure claims.
Investigators say the money was subsequently siphoned out through a series of transactions that should have raised immediate alarms inside any properly functioning anti-money laundering framework.
The most startling transaction involved the withdrawal of Sh799.8 million in cash by Billy Otieno Obango, the programme’s former accountant. Additional funds were allegedly channelled to proxy entities, including 020 Investments Limited, before being invested in high-value assets and real estate.
The Ethics and Anti-Corruption Commission has since secured court orders freezing several properties allegedly acquired using proceeds of the scheme, including the Skyline Hotel in Eldoret and multiple residential developments.
The question now confronting regulators is not merely how the fraud occurred, but how such extraordinary transactions were allowed to pass through one of Kenya’s largest banks without being stopped.
The PROFIT account presented a series of glaring red flags.
It belonged to a donor-funded programme that had officially ceased operations years earlier. Despite its dormant status, it suddenly received over Sh1.3 billion from the National Treasury. Massive cash withdrawals followed, culminating in nearly Sh800 million being collected by a single signatory. Funds then allegedly moved into private entities later linked to property acquisitions.
Under Kenya’s anti-money laundering laws and Central Bank regulations, such activity would ordinarily trigger enhanced scrutiny, transaction monitoring reviews and consideration of suspicious transaction reports to the Financial Reporting Centre.
Financial crime experts note that dormant accounts receiving enormous public transfers, followed by extraordinary cash withdrawals and rapid movement of funds into private entities, represent precisely the type of activity modern compliance systems are designed to detect.
Yet investigators have not disclosed any evidence suggesting that the transactions were halted before the EACC stepped in.
The scandal is particularly damaging because it revives concerns that first emerged during the National Youth Service corruption investigations.
In 2018, the Central Bank of Kenya fined Co-operative Bank Sh20 million for anti-money laundering failures linked to suspicious NYS transactions. Regulators cited weaknesses in customer due diligence, transaction monitoring and reporting obligations. At the time, the bank had processed approximately Sh263 million connected to questionable NYS transactions.
Nearly a decade later, the PROFIT scandal appears to feature many of the same warning signs, only on a significantly larger scale.
The latest revelations raise uncomfortable questions about whether the lessons from the NYS enforcement action were ever fully absorbed and whether compliance reforms introduced afterward were sufficient to prevent similar risks from re-emerging.
The consequences extend far beyond Co-operative Bank.
Kenya remains on the Financial Action Task Force grey list after being placed under increased monitoring in February 2024. The country’s action plan specifically requires stronger anti-money laundering supervision, higher-quality suspicious transaction reporting and more effective detection of financial crime.
Cases such as PROFIT threaten to undermine those efforts.
Every major money laundering scandal strengthens the perception among international financial institutions that Kenya’s financial system remains vulnerable to abuse. Correspondent banks become more cautious, compliance costs rise and international transactions face additional scrutiny. Legitimate businesses and ordinary customers ultimately bear the burden.
For donor agencies and development partners, the scandal may prove even more damaging.
The funds at the centre of the case were intended to expand financial inclusion and improve access to credit for small-scale farmers in some of Kenya’s most vulnerable rural communities. Instead, investigators allege that hundreds of millions of shillings were converted into cash and diverted into private assets.
The EACC has moved to recover the proceeds, and the courts have frozen several properties. But asset recovery after the fact cannot erase the deeper institutional failure that allowed the money to move so freely in the first place.
Co-operative Bank now faces difficult questions that cannot be ignored.
Why was the PROFIT account allowed to remain operational years after the programme had officially closed? What compliance alerts, if any, were generated when more than Sh1.3 billion suddenly entered the account? Were suspicious transaction reports considered before investigators uncovered the scheme? And what specific reforms were implemented after the bank’s 2018 anti-money laundering penalty to prevent a repeat of similar failures?
Until those questions receive clear answers, the PROFIT scandal will remain a troubling symbol of how public and donor funds can disappear in plain sight while the institutions tasked with safeguarding the financial system fail to intervene.
The alleged looting of development resources was carried out by individuals. But the movement of money on such a scale required banking channels that failed to stop it. That reality places Co-operative Bank’s role at the centre of one of the most consequential financial scandals Kenya has seen in recent years.
