Kenya Commercial Bank (KCB) is on the spot following an investigative report released by US-based agency The Sentry that linked the financial institution to alleged money laundering
A three-year investigation by The Sentry into a loan deal between a local company and a regional bank with the backing of the South Sudan government has uncovered red flags for illicit business practices, including bribery, tax evasion, and trade-based money laundering. The investigation found clear indications that the arrangement enabled powerful individuals to benefit from the manipulation of business worth hundreds of millions of dollars. The loan deal skirted legislation on oversight, transparency, and competition and facilitated off-book government spending, including supplies of fuel to the South Sudan army. It also perpetuated a damaging reliance on future oil production to finance current spending, mortgaging the future prosperity of the country and its citizens.
In April 2018, South Sudan’s Trinity Energy Limited agreed a trade finance facility with Cairo-based African Export-Import Bank (Afreximbank) for a series of $30 million loans to purchase diesel and gasoline to sell to the South Sudan market. As part of the deal, the government of South Sudan committed to award cargoes of crude oil to Trinity Energy.
The arrangement gave Trinity Energy a company that had never before traded crude privileged access to the market for South Sudan’s oil, the country’s most valuable resource and the source of the vast majority of its national wealth. Crude oil earnings accounted for 81% of government revenue in the second half of 2018, when the Afreximbank trade finance deal was first in place. Trinity Energy was awarded more than 40% of crude cargoes contracted by the government from June 2018 to May 2019. At the same time, the company was given a dominant role in the market for petroleum and diesel imports, a position that facilitated its secretive provision of fuel to the South Sudanese army.
The trade finance facility also gave Glencore Singapore Pte Ltd, a subsidiary of Geneva-based oil trader Glencore PLC, privileged access to crude contracts. The agreement designated the firm as the “original offtaker,” meaning that it bought and shipped the cargoes of oil awarded by the government to Trinity Energy. Glencore shipped South Sudanese crude worth $376 million in 2019, all of it through deals with Trinity Energy and Afreximbank.
The Sentry interviewed a former Trinity Energy employee Biswick Kaswaswa and reviewed the trade finance facility, bank statements, emails, internal memos, and ministerial correspondence and found that the arrangements between Trinity Energy, Afreximbank, and the government of South Sudan were contrary to South Sudanese law, and their implementation raised red flags for bribery, tax evasion, and trade-based money laundering.
The investigation found that Trinity Energy spent millions of dollars on “facilitation” and “business acquisition” costs for the Afreximbank deal, including 18.7 million South Sudanese pounds (SSP) ($125,000) in payments to the government committee responsible for approving the deal.
During the implementation of the trade finance deal, Trinity Energy changed millions of US dollars on the black market, paid fake invoices overseas to disguise the black market exchange of hundreds of thousands of dollars, and engaged in behaviors indicative of tax fraud. The South Sudanese government’s actions were at odds with its own laws on procurement, competition, transparency, and petroleum revenue management.
The absence of checks to government power in South Sudan opens the door to commercial dealings that are based on personal relationships and the exchange of benefits and favors. The result is that companies and the executive branch can conduct business in the absence of oversight or transparency and with scant regard to the rule of law, economic sustainability, and the wellbeing of the nation and its citizens. State officials and businesspeople operate in an environment of impunity that incentivizes rather than deters negligence, rent-seeking, and illegal activity.
The Sentry now wants the accounts of one of the company’s directors a Ms Ann Kathure Rutere be investigated to ascertain whether any dubious or illegal payments or deposits have been made into her accounts. Where appropriate, Kenya should launch criminal proceedings to repatriate assets.
Trinity Energy is 99% owned by Trinity Holdings, with 1% held by South Sudanese citizen Akol Emmanuel Ayii Madut. At the time the deal was arranged and implemented, Ayii had a 90% share in Trinity Holdings, with 10% owned by his wife, Kenyan citizen Ann Kathure Rutere. Rutere’s 10% stake was acquired by Indian national Richard Thadeus Raja in 2021. Ayii, Rutere, and Raja were the three directors of Trinity Energy at the time the deal was arranged and implemented, with Ayii in the position of chair and Rutere as executive director.
Rutere, Trinity Energy’s executive director at the time the deal was arranged and implemented, told The Sentry, “During my tenure the company conducted business in a very transparent manner and at no point did we engage in bribes.” But Rutere also said that she does not speak for the company and that she was “not involved in the negotiations” for the Afreximbank deal, “not involved in Trinity Energy operations relating to exportation of crude oil cargoes,” and “not involved in the actual enforcement or perfor- mance relating to the Afreximbank instruments.” Rutere signed off on the Afreximbank deal, she told The Sentry, but said that she was “preparing to exit” the company, a process that was ultimately to take “about a year.
Trinity Energy spent $6.5 million to secure the Afreximbank trade finance facility and arrange the first two LCs under the deal, an internal company document seen by The Sentry reveals. The $6.5 million outlay is equivalent to 11% of the combined $60 million value of the first two LCs. The magnitude and nature of that spending raises numerous red flags for bribery. Of the total $6.5 million, Trinity spent $2.5 million on fees associated with the Afreximbank facility, a further $2.5 million on what the document describes as “visits, meetings, [and] travel involving stakeholders,” and another $1.5 million on what are labeled “lobbyist fees and facilitation fees.” To put this expenditure into context, the $6.5 million that Trinity Energy spent to set up the Afreximbank deal was more than half the government’s 2018/19 health budget.
The $1.5 million spend on “lobbyist fees and facilitation fees” is particularly concerning, as both lobbying and facilitation payments are red flags for bribery. Facilitation payments, according to Transparency Interna- tional, are “small bribes … made to secure or speed up a routine or necessary process to which the payer is entitled anyway.”
Payments to government officials to speed up routine services are outlawed in many countries around the world.195 “Facilitation payments” are among the offenses included in the UK Bribery Act (2010), while the Organisation for Economic Co-operation and Development describes such payments as “corrosive,” particularly to “sustainable economic development and the rule of law.” The African Union Convention on Preventing and Combating Corruption, which South Sudan signed in 2013 but has not yet ratified, states that “acts of corruption” include the offering to public officials, or the acceptance by public officials, “of any goods of monetary value, or other benefit … in exchange for any act or omission in the performance of his or her public functions.
On August 1, 2018, Rutere wrote to CEO Robert Mdeza requesting 10 million SSP ($67,000) to cover “Business acquisition fees payable to facilitators.” In the letter, Rutere approved her own request, declaring that the funds would be “availed and delivered by Lual Kur today.” Lual Kur refers to Lual Kur Wiir, Trinity Energy’s human resources (HR) and procurement manager at the time. The internal Trinity Energy memo confirms that 10 million SSP was paid in cash to Rutere via Kur Wiir. Kaswaswa was told by senior executives at the firm that the money released to Rutere was for payments to the “Minister of Finance
and his team.” The money, Kaswaswa contends, was a “bribe” for the minister’s “involvement in support- ing Trinity to secure the LC.” Rutere did not return any funds to Trinity Energy, and her spending was not receipted. “We never received any receipts when we made these payments,” said Kaswaswa. “Ann [Rutere] and her team were refusing to make sure there was supporting documentation for these trans- actions.” The Sentry made numerous attempts to contact the minister of finance at the time, Salvatore Garang Mabiordit, for comment, but was unsuccessful.
Despite writing the letter, Rutere told The Sentry that she was “not involved in the day to day operations at Trinity Energy” and that she was “not aware that the referenced money was used for bribery.” Rutere later claimed that the money she received was used to “clear outstanding accrued bills of 2016 to 2018,” most of which, she said, were “directly known to me since I was the one fully in charge of [the] company’s prior day to day operations.” According to Rutere, “Cash was used to acquire land for Trinity Energy retail outlets [filling stations] and to offset some bills accrued by Trinity during the period that business was bad and the company suffered significant financial burdens. Most of the payment[s] executed during my tenure were largely related to arrears incurred between 2016-18 for outstanding accounts and/or for the acquisition of retail outlets.”
Kaswaswa rejects this explanation: “If they were paying off debts, why did they not disclose the debts to us? We were not told about any debts.” According to Kaswaswa, “most of the payments” for the acquisition of filling stations “were done in a proper way – paying a cheque and being clear what the payment was for. It doesn’t make any sense to disguise transactions that were for filling stations,” he told The Sentry.
KCB Bank
In September 2018, Raja demanded $25,000 in cash to fund expenses for a trip to UN headquarters in New York City to petition for a contract being tendered by the UN Interim Security Force for Abyei, Kaswaswa told The Sentry. At Raja’s instruction, Kaswaswa withdrew $25,000 in cash for the director to take on the trip.284 “I wrote a letter to KCB Bank on September 6 requesting payment of $25,000 in hard cash,” Kaswaswa told The Sentry. The withdrawal is corroborated by a statement for a Trinity Energy account at KCB Bank. The funds released to Raja were not necessarily used for lobbying: his $25,000 withdrawal was self-authorized, and the expenses were not receipted, so their purpose is not clear. Raja traveled to New York alone and was away for less than three weeks, according to Kaswaswa. If the funds were for the director’s own costs, this would have amounted to a personal expense budget of more than $1,000 per day. Raja did not return any unspent funds to the company, said Kaswaswa.
Both the 2017/18 and 2019/20 Financial Acts published by the Ministry of Finance and Planning state that import license fees for petroleum products are set at 3 SSP ($0.02) per liter. Internal Trinity Energy documents seen by The Sentry show that the company was paying only 1.5 SSP per liter in import license fees, half the official price, and this was confirmed by Kaswaswa.
The savings from the tax break could amount to a substantial sum. “Within the period that I was there [from June to October 2018], Trinity imported more than 60 million liters of fuel, worth more than $60 million,” said Kaswaswa. “At 3 SSP per liter, the import license fee would be 180 million SSP [$1.2 million]. The government was paid only half of this.” Based on Kaswaswa’s figures, at the official exchange rate the cost to the public treasury and the savings for Trinity Energy would be more than $600,000 in just five months.
Kaswaswa was directly involved in facilitating cash payments totaling 3.5 million SSP ($23,334) from Trinity Energy to a government official in exchange for the discount, according to documents seen by The Sentry and Kaswaswa’s own account. On October 6, Kaswaswa and a second Trinity Energy staff member handed 3.5 million SSP “in a sack” to a Ministry of Petroleum representative waiting in the lounge of a KCB Bank branch in Juba, Kaswaswa told The Sentry. Documents seen by The Sentry show the withdrawal of 1 million SSP ($6,667) in cash from a Trinity Energy bank account at KCB Bank on September 25, 2018, and a check for 2.5 million SSP ($16,667) made out to Kaswaswa by Trinity Energy executives, also from a KCB Bank account, which was cashed on October 6.
Black market currency deals
Trinity Energy used a local travel company to exchange US dollars for South Sudanese pounds on the black market, according to first-hand accounts, bank statements, and internal company communications seen by The Sentry. Trinity Energy is far from unique in seeking to profit from the disparity between South Sudan’s official exchange rate and that on the black market, but the company took a practice common among indi- vidual citizens and local businesses and deployed it on a grand scale, generating illicit profits worth millions of dollars.
In late 2018, Trinity Energy was racing to raise South Sudanese pounds to meet a November 15 deadline to repay a 4.2 billion SSP ($28 million) debt to the government of South Sudan. The cargoes of crude oil the company sold to Glencore Singapore Pte Ltd were priced in US dollars; and, in a country where hard curren- cy is highly prized, Trinity should have had no problem exchanging its dollars for South Sudanese pounds at a licensed bank. The black market, though, offered a lucrative alternative. The official exchange rate was around 150 SSP per US dollar, but internal Trinity Energy documents show that the company planned to exchange its dollars at a rate of 200 to 210 SSP per US dollar at least a third more than the official rate.
The task of changing Trinity’s dollars was entrusted to Iraqi-born Juba resident Muhammad Oglah, the managing director of a local company, Moonlight Travel & Tours. Trinity Energy gave Oglah cash and paid checks to Moonlight from Trinity Energy accounts at Equity Bank, according to documents seen by The Sentry. Oglah and his associates exchanged the dollars on the black market in Juba and paid the resulting South Sudanese pounds into a separate Trinity Energy account at KCB Bank. Trinity Energy’s use of the black market to exchange foreign currency in 2018, and the involvement of Moonlight Travel & Tours, was confirmed by Ann Kathure Rutere, one of Trinity Energy’s directors at the time. “The sourcing of US dollars and SSP from the informal market is normal practice in South Sudan where the availability of exchange currency is often low,” she told The Sentry. “After war of 2016, [the] banking industry collapsed and you could not transact either SSP or USD,” she said.
According to Rutere, exchanges such as those between Trinity Energy and Moonlight Travel & Tours were done “over the table in an open and lawful manner through the banks.” But the practice of exchanging foreign currency on the black market is illegal under South Sudanese law. A 2012 regulation on the licensing and supervision of foreign exchange bureaus states: “The foreign currency business in South Sudan may only be engaged in, apart from a bank licensed in accordance with the Bank of South Sudan Act, 2011, by an enterprise licensed as a foreign exchange bureau by the Bank in accordance with this regulation.”
The Sentry found no official record that Moonlight Travel & Tours was licensed as a foreign exchange bureau in 2018. Even if Moonlight were a licensed foreign exchange bureau, black market foreign exchange transactions with unlicensed counterparties would still be illegal.
The Sentry reviewed bank statements and internal company communications that show the Moonlight strategy in action. In a 10-week period between August 14 and October 26, 2018, Trinity Energy gave Moonlight Travel & Tours more than $560,000 in cash to convert to South Sudanese pounds on the black market, an internal accounting summary seen by The Sentry reveals. At the official exchange rate, this money would be worth 84 million SSP, but at Trinity Energy’s target black market rate, it would be worth 115 million SSP—a premium of 31 million SSP ($207,000).
An internal Trinity Energy document supports the assertion that the invoices from Welldone Suppliers were being used to disguise the exchange of hundreds of thousands of US dollars on the black market in Juba. The document, entitled “Conversion Schedule with Moonlight as of 16th October 2018,” lists deposits of South Sudanese pounds made by Moonlight to Trinity Energy between October 5 and October 16, 2018, and payments of US dollars made by Trinity Energy to Moonlight over the same period.
Under the heading “US$ cash submitted to Moonlight” are two payments by Trinity Energy from an account at Stanbic Bank for the same amounts that were invoiced by Welldone Suppliers.
The contention that the invoices from Welldone Suppliers were for illicit purposes is supported by internal Trinity Energy email communications seen by The Sentry. On October 11, the day that Trinity Energy re ceived the first invoice, an email was circulated to company executives—including Akol Emmanuel Ayii Mad- ut and Robert Mdeza with the subject line “Invoice for $200,000.00 – For Payment.”791 The email stated: “The SSP equivalent has been deposited in our KCB account.”
According to bank statements seen by The Sentry, three individuals and one company paid a combined total of more than 44 million SSP ($293,000) into a Trinity Energy account at KCB Bank between September 10 and October 6, 2018. The three individuals and the company were all identified by Kaswaswa as black-market traders deployed by Oglah to change money on behalf of Trinity Energy.
The overlapping interests in these companies make such payments vulnerable to transfer pricing. International best practice dictates that to ensure transactions are based on a fair market price, they must be carried out in a manner consistent with the arm’s length principle, which states that “transactions between associated enterprises should not be distorted by the special relationship that exists between the parties.”Evidence reviewed by The Sentry suggests that some of the transactions between Trinity Energy and companies in which its directors owned shares may have breached the arm’s length principle. Some also raise red flags for fraud and trade-based money laundering.
The large number of companies in which Ayii and Rutere have had shareholdings is a structural risk indicator for trade-based money laundering. The Sentry found that Ayii and Rutere have held shares in at least 30 companies in South Sudan and Kenya, and that at least eight have been registered in the name of their daughter. Their daughter was registered as a shareholder in seven companies in five of which she was named a director and in one a managing director while under two years old. According to Rutere, sev- eral of the companies set up by her and her husband have never operated, while others operated for a time and have since ceased to do business. The registering of their daughter as a shareholder was done “out of natural love and affection,” she said. Rutere said she was not aware that her daughter had been appointed to several director positions, despite having signed two of the documents concerned.
The report now seeks the US Department of the Treasury’s Financial Crimes Enforcement Net- work (FinCEN) to investigate the ways in which the proceeds of corruption in South Sudan’s oil sector are laundered outside the country. Most financial transactions in this context, including many of the transactions identified in this report, involve the use of US dollars. FinCEN should issue a section 314b under the Bank Secrecy Act to compel financial institutions and their foreign counterparts to identify related transac- tions and submit suspicious activity reports when there is suspicion of laundering the proceeds of corruption.
South Sudan has been added to the FATF “grey list” due to anti-money laundering and countering the financing of terrorism (AML/CFT) deficiencies. This means that obliged businesses must implement enhanced measures on all businesses and transactions incorporated in or beneficially owned or controlled by persons in South Sudan. Global and regional financial institutions should take measures to identify accounts held or beneficially owned by those with business dealings in South Sudan’s oil sector and senior South Sudanese politically exposed persons (PEPs), carry out a comprehensive assessment to identify their broader international networks, and determine measures needed to mitigate the risks involved in such accounts and customer relationships. Financial institutions should also undertake increased screening, enhanced ongoing monitoring, and transaction reviews to identify, investigate, and report potentially suspicious financial activity related to South Sudan, especially with respect to international networks profiting from such activity.
Strings of money laundering allegations.
In 2019, KCB was linked to money laundering on behalf of corrupt government officials in South Sudan, including senior military leaders sanctioned by the United Nations in the wake of the civil war which erupted in December 2013.
Predictably the lender have to date denied involvement in the fishy business.
On its part the then KCB ‘s Group CEO, Joshua Oigara said the lender being a regulated entity deployed global standards and had no proclivity to engage in money laundering in all the countries of its operations including Burundi, Kenya, Rwanda Tanzania , Uganda and South Sudan.
“KCB South Sudan continues to work closely with the Government of South Sudan and the Bank of South Sudan with regards to resolutions on UN Security Council Sanction List 2206,”Oigara said in a press release.
According to data from the Central Bank of Kenya (CBK), the monetary authority of Kenya, East Africa’s biggest economy, nine local banks had subsidiaries within the East Africa Community (EAC), which draws in six countries including, Burundi, Kenya, Rwanda, South Sudan, the United Republic of Tanzania, and the Republic of Uganda, with its headquarters in Arusha, Tanzania.
According to the US-based Sentry organization, a two-year investigation into the corruption in South Sudan, money movement and assets locations, found KCB has taken part in abetting money laundering on behalf of the elite in South Sudan.
Among the senior army generals in South Sudan who the report named as culpable was General Gabriel Jok Riak, who was called out for transferring hundreds of thousands of US dollars to his personal bank account in the Kenyan bank yet his monthly salary was less than $3,000 dollars, or only about $35,000 a year.
General Riak, commander of Sector One, which includes Divisions 3, 4, and 5, of the South Sudan’s army, the Sudan People’s Liberation Army (SPLA), has been under the United Nations sanctions for his brutality during the civil war. His known assets have been frozen and he is banned from travelling to foreign countries.
“Specifically, Gen. Jok Riak had command authority over a full-scale 2015 offensive across three states in violation of multiple ceasefires and resulting in the displacement of over 100,000 people and the commission of grave war crimes,” said The Sentry report, titled ‘War Crimes Shouldn’t Pay.’
“Bank records reviewed by The Sentry indicate that Gen. Jok Riak received large financial transfers totaling at least $367,000 to his personal bank account at Kenya Commercial Bank (KCB) from February to December 2014 alone—sums that dwarf his official annual salary of about $35,000,” The Sentry report revealed.
Also indicted include General Reuben Riak Rengu, who the report revealed was directly involved in procuring weapons and planning military offensives but also is involved in a wide range of commercial ventures and had received substantial payments from multinational firms from at least three countries that operate in South Sudan through KCB.
“Although Gen. Reuben Riak’s official annual salary is about $32,000, information obtained by The Sentry suggests that he is living well beyond what such a salary would support and appears to have received hundreds of thousands of dollars in payments from numerous multinational companies active in South Sudan,” the report revealed.
General Reuben has illegally transferred to his personal bank account at the Kenya Commercial Bank millions of US dollars, despite having a salary of less than $3,000 dollars a month.
“Documents reviewed by The Sentry show $3.03 million moving through Gen. Reuben Riak’s personal bank accounts US-dollar denominated account at Kenya Commercial Bank (KCB) between January 2012 and early 2016,” the report further revealed.
The transactions recorded, it said, include more than $700,000 in cash deposits and large payments from several international construction companies operating in South Sudan.
Additionally, the report showed that over this four-year period, $1.16 million US dollars in cash was withdrawn from his KCB account.
The report further revealed documented proofs that General Reuben and many of his children have. According to the report, international banks are looking to mitigate the risk stemming from South Sudan’s banking sector in order to avoid regulatory fines and reputational harm.
“Larger banks operating in East Africa have a network of correspondent relationships and help connect smaller South Sudanese banks with the global financial system. Because of these ties to the regional correspondent banking network, South Sudanese banks hold nested accounts in Kenya and Uganda.” says Sentry. shares in companies operating in South Sudan.
Ms. Sigal Mandelker, the US Treasury’s under-secretary for terrorism and financial intelligence while on a tour of East Africa publicly stated that some South Sudanese who are under UN sanctions had continued to invest illicit money in Kenya’s real estate market.
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