By Prudence Minayo
Little was known about businessman Zafrullah Khan until 2016 when Chase Bank was declared redundant and its operation halted by the Central Bank of Kenya (CBK). Zafrullah-who was the bank’s chairman-was accused of orchestrating corrupt dealings that included a series of illegal withdrawals amounting up to Ksh 1.7 billion.
Here is the story of the billionaire as told by WoK.
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Zafrullah Khan wealth of experience in the banking and finance industry spans over three decades. He began his career as the Managing Director (MD) of Indosuez Merchant Finance (Kenya) limited – a wholly subsidiary of Swiss-based Credit Agricole (Suisse). He went on to work with the international audit firm Coopers & Lybrand as a senior editor. He later became the MD at both Francis Drummond and PriceWaterhouseCoopers limited.
Apart from founding Chase Bank, he served as the Chairman of Investment Bank, Genghis Capital. He is a registered and an associate member of the Institute of Chartered Accountants of England and Wales as well as a senior member of the Institute of Certified Public Accountants of Kenya where he sits on the Banking Committee. He is also a member of the Institute of Certified Public Secretaries of Kenya (ICPSK).
The Collapse of Chase Bank
Chase Bank was one of the largest financial services providers in Kenya holding assets amounting up to Ksh 142 billion. The bank, which was licensed by CBK, was founded in 1996 by Zafrullah Khan and collapsed 20 years on account of corruption and money laundering allegations. On 7th April 2016, the bank was placed under receivership by the Central Bank of Kenya over reports of insider loans and not meeting the statutory banking ratios.
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In June 2017, officers from the Banking Fraud Investigations Unit arrested Zafrullah Khan after the then Director of Public Prosecutions (DPP) Keriako Tobiko ordered his arrest and prosecution. In April 2018, the Central Bank of Kenya announced that the bank was under liquidation and the State Bank of Mauritius (SBM) was acquiring certain assets of Chase including 75 Percent of deposits, bank staff and branches and merging them with their subsidiary, SBM Kenya. The remaining assets and liabilities were then transferred to Kenya Deposit Insurance Corporation for liquidation.
The Scandal and Corruption Allegations
According to an article published by the Star newspaper, former Chase Bank Chairman Zafrullah Khan awarded himself a three-year consultancy contract for unspecified projects in the bank, just 16 months before its collapse. A special audit report released on April 7th 2016 by Deloitte revealed that Mr. Khan was to earn Ksh 5.15 million per month from the consultancy role. The report revealed that by May 2016, Khan had helped bank’s bosses loot Ksh 15 billion. First, the bank operated two general ledger accounts: CBK Settlement account number 04005459002 worth Ksh 9,222,606,805 and Sundry Debtors account number 100004715 worth Ksh 1,453,589,511. Although the two accounts worth Ksh 10.67 billion were at first classified as Chase Bank’s assets, they were later changed to be loans and advances during the 2016 statutory audit.
According to Chase Bank’s general manager Makarios Agumbi, Ksh 7.5 billion was used to buy 12 properties for the bank but it was later revealed that only Ksh 1.3 billion of the Ksh 7.5 billion can be accounted for. To make matters worse, Mr. Khan and the Bank’s MD Mr. Duncan Kabui owned shares in five companies that owned the properties. They include Riverside Mew Limited that acquired Riverside office block at Ksh 150 million, One Riverside apartment worth Ksh 70 million, English Point Marina apartment worth Ksh 70 million, three plots in Voi worth Ksh 18 million and Ukunda mosque plot valued at Ksh 32.56 million. Nine Fifty Limited owns three properties in Diani valued at Ksh 25 million and Rinascimento Limited, associated with the Bank’s Managing Director, owns agricultural plots in Nyandarua valued at Ksh 40 million.
Other entities owned by Zafrullah Khan and Duncan Kabui are Mathatani and Lighthouse Property Limited but are listed as holding investments on behalf of Chase Bank. On December 30th 2015 just a day before the closure of that financial year, the bank issued Ksh 1,023,900,000 to Camelia Investment, Coinbrook Holdings, Cleopatra Holdings and Golden Azure Investment without the requisite documentations or securities. The companies were jointly owned by Khan and Kabui with other beneficiaries being Mohammed Zasrullah Khan and Claude Wagner Khan who are brothers to the Chairman. Apart from illegal loans, Chase Bank leadership were involved in illegal withdrawals that amounted to billions of shillings. In April 2016, the balance on the shilling denominated account showed it at 2,290,347,571 but confirmation from the Development Bank showed a balance of 997,833,517 hence a deficit of Ksh 1.29 billion. The dollar denominated account reflected a balance of USD 2.5 million against a USD 15 Million presented hence a deficit of USD 12 Million.
The Star Newspaper continued to reveal that there were also irregular withdrawals by shareholders including Ksh 612,992,970 from CBK settlement account and Development account by James Mwaura who served as the Bank’s Credit Manager. The auditors established that only Ksh 388,856,636 was released to the account which meant Ksh 224,136,335 was missing. The forensic report by Deloitte concluded that the use of internal accounts for private individual transactions exposed the bank to money laundering. The CBK and officers from the Banking Fraud Investigations are still pursuing Khan and eight other senior managers and directors of Chase Bank to face corruption charges amounting to Ksh 14.9 billion. The case is currently in court awaiting hearing and ruling.