Bank scam threatens Kenya economy

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The government of Kenya is being accused of failing to act on evidence of an alleged banking fraud worth $1.5bn, dwarfing other recent scandals.

The alleged scam, involving money laundering and tax evasion, was exposed by whistle-blowers as early as 2004.

Investigators believe tax evasion and money laundering worth 10% of Kenya's national income are involved.

A recent auditor's report says the scale of the operations "threatens the stability of the Kenyan economy".

The government is being accused of dragging its feet on the issue, but Finance Minister Amos Kimunya said the government was closing in on the perpetrators.

"I can assure you that we will be taking action within the law in as short a time as possible," he told the BBC.

But one of the key whistle-blowers, Titus Mwirigi, now in hiding in the United States, has questioned the commitment of a government, elected to power on an anti-corruption ticket.

He told the BBC that virtually all of those hired to probe the operations at Charterhouse Bank Ltd have been moved off the case or have fled overseas.

The auditor's report, which was seen by the BBC, has called for the bank's licence to be withdrawn,

The BBC's Karen Allen in Nairobi says that for a government seeking re-election next year in a crucial presidential vote, this could be the final test of its willingness to take on powerful business interests.