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How Co-operative Bank lost millions to gamblers


All that one gambler needed to withdraw Sh14 million from a bank was an account and a mobile phone.

This was revealed as it emerged that Co-operative Bank of Kenya has lost Sh115 million to gamblers.

Fears that more banks may be losing huge sums of money in this way emerged after a customer sued Co-op Bank for freezing his account for being overdrawn.

Antony Kimani’s account had Sh18 million, from which he withdrew Sh14 million. The bank said the money did not belong to him and went ahead to freeze the account, causing Mr Kimani to sue.

The Sh115 million the bank lost is said to have been siphoned by seven customers in 2011. The other customers were not named in the suit before High Court judge Fred Ochieng.

Justice Ochieng heard that all Kimani needed to siphon the money and use it for gambling online was his mobile phone.

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His account was connected to the mobile banking facility, meaning he could operate it remotely from his phone.

Kimani’s was a savings account where inflows were expected to be more than outflows. And when he was asked why the opposite was the reality, Kimani told the court he opened the account purely for gambling purposes. However, he never banked any money from possible wins.

DIFFERENT ROUTE

But the bank system malfunctioned, preventing it from debiting Kimani’s account. And even though the system was not picking up debits, the credits were being received through a different route.

Edwin Karuri, a manager with the bank, told the court that on May 7, 2011, he started investigations that revealed seven customers transacted debits totalling Sh115, 869,566 over a period of eight months using credit cards. However, the same had not been debited from their respective bank accounts.

Investigations revealed that between October 2010 and May 6, 2011, transactions from gambling sites were not being recognised by the bank’s master software.

The bank later learnt the seven customers opened accounts at one branch after they were introduced by one of the bank’s employees.

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“This led to suspicion that bank employees were aware of the malfunction in the bank’s system and had encouraged customers to take advantage of it,” Mr Karuri said.

He also said transactions were being carried out when the bank’s main operating software was offline, having been switched off. All the debits were in relation to internet transactions for gambling.

He added that Kimani carried out his transactions at night.

But the judge found the claims untrue, saying gambling on the internet was not prohibited at the time so Kimani had no need to keep his activities secret.

Both the bank and its customer lost, as the judge dismissed the case. The court declined to order Kimani to refund the Sh14 million.

 

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