Fraud at the Nairobi Securities Exchange (NSE)

Fraud at the Nairobi Securities Exchange (NSE). The saga below relates to incidents of the years 2003 and 2004, regarding fraud back then amounting to about 52 million Kenya Shillings at the Nairobi Securities Exchange (NSE), then known as the Nairobi Stock Exchange (NSE). 52 million Kenya Shillings is the approximate equivalent now in May 2022, of US $ 447,697. However, at exchange rates of the year 2003, 52 million Kenya Shillings was the approximate equivalent back then of US $ 702,884.

A brief background to the saga is as follows:

Independence in Kenya in 1963 was a rushed affair and amongst the consequences of this, was the hurried migration out of Kenya of significant numbers of Asian Kenyans and White Kenyans who opted for citizenships in other parts of the world, rather than reapply afresh for citizenship in newly independent Kenya, with no guarantee of their applications for citizenship in independent Kenya being approved i.e. the waiting period was about two years to know if your application had been approved.

As a result of this, many Asian Kenyans and White Kenyans of those times, left without regularising their assets here in Kenya, some of which were shareholdings in different publicly listed companies in Kenya back then. There are those Asian Kenyans and White Kenyans, who despite leaving Kenya in a rush back then, did manage to regularise their assets, including their shareholdings in different companies, but who passed away before fully disclosing their assets or holdings in Kenya back then, to the their dependents, next of kin, or descendants.

In principle therefore, there are shareholding accounts in different publicly listed companies in Kenya that have been dormant for years and years now, some up to 60 years or more, that have accumulated unpaid dividends and that have also grown in shareholding size over the years through what are referred to as bonus share issues, what are referred to as share splits, and what are referred to as scrip dividends.

After dividends are declared and paid out, dividend accounts are balanced through an accounting process known as reconciliation, and unpaid dividends are transferred to what are referred to as unclaimed dividend accounts, and one way of telling a dormant account, at a glance, is unclaimed or unpaid dividends stretching over a long period of time e.g. Mr. X or Mrs. X has unclaimed dividends dating back to e.g. the year 1958.

It is unclear at what point exactly, but individuals began targeting dormant shareholder accounts to defraud. Some of the fraud was elaborate e.g. if a shareholder account belonging to Mrs. X had unclaimed dividends dating back to e.g. the year 1958, then a fraudulent Mrs. X would be “created” on the spot e.g. if Mrs. X was a White Kenyan, then a “White Kenyan” aged about 86 years old, would “fly” into Kenya on holiday from e.g. Canada, and use the opportunity to visit different Share Registrar Offices to regularise and sell off her shareholdings in different Kenyan companies, shareholdings that she left unattended when she left Kenya in hurry at independence in 1963.

This elaborate fraud involved (or involves) staff who worked (or who work) in shareholding offices, who would smuggle out e.g. a sample of the last known signature used by the shareholder in e.g. the year 1958, for onward forwarding to “experts” at forging signatures.

The internet link below involves one such incident of fraud that took place in Kenya 19 years ago in 2003 involving 52 million Kenya Shillings, the approximate equivalent now in May 2022, of US $ 447,697. However, at exchange rates of the year 2003, 52 million Kenya Shillings was the approximate equivalent back then of US $ 702,884.

The saga at the internet link below is lengthy, and at a moderate pace, should take about four hours to read and understand.