Court halts prosecution of bank CEOs in Sh363 million First Assurance case

The High Court has dealt a setback to Prime Cabinet Secretary Musalia Mudavadi after granting orders temporarily stopping the prosecution of senior executives from Co-operative Bank, KCB Bank and NCBA Bank in the Sh363 million First Assurance fraud case.

The orders shield the banks’ chief executives and other senior officials from criminal proceedings pending the hearing and determination of their petitions challenging the decision to charge them.

The development comes days after Mudavadi and other shareholders of First Assurance reportedly gave the three banks a 24-hour ultimatum to commit to refunding Sh363 million that prosecutors allege was fraudulently siphoned from the insurer by former executive Salim Busaidy over a six-year period.

The banks declined the demand, arguing that they could not be held liable for losses allegedly perpetrated internally over several years.

They questioned how the alleged fraud could have gone undetected for such a prolonged period before responsibility was shifted to the financial institutions and they were asked to reimburse the full amount.

Following the banks’ refusal, state investigative and prosecutorial agencies initiated criminal proceedings against the bank executives, prompting the officials to move to court in a bid to halt the prosecutions.

In their petitions, the executives argue that the decision to charge them is unlawful, amounts to an abuse of the criminal justice process and violates their constitutional rights.

The court’s conservatory orders temporarily suspend the prosecutions until the matter is heard and determined.

The dispute stems from investigations into the alleged loss of Sh363 million at First Assurance, with prosecutors alleging that the funds were fraudulently transferred over several years.

The case is expected to test the extent of the responsibility of financial institutions in detecting and preventing alleged fraudulent transactions, as well as the powers of investigative and prosecutorial agencies in pursuing criminal liability against bank officials.

A former company director and ex-nominated Member of the County Assembly (MCA), Salim Mohamed Busaidy, was arraigned before a Nairobi court over an alleged fraud scheme involving Sh363.4 million belonging to First Assurance Investment Company Limited, where he served as a director.

Busaidy was a signatory of First Assurance Investment Company Limited representing Mudavadi when he sold it to other parties.

He was charged following investigations by the Directorate of Criminal Investigations (DCI) Financial Investigations Unit (FIU), which linked him to the alleged theft of Sh363,420,459 between May 18, 2018 and April 30, 2024.

According to investigators, Busaidy allegedly conspired with other suspects who were not present in court and used his position as a company director, together with access to the firm’s accounts at KCB Bank, NCBA Bank and Co-operative Bank, to unlawfully withdraw company funds.

The prosecution told the court that the money was allegedly used to acquire motor vehicles and other assets.

The former MCA faces several charges, including conspiracy to defraud, stealing, making a document without authority and acquisition of proceeds of crime.

Investigators further alleged that Busaidy forged the signature of his co-director, Issa Abdalla Issa, on numerous company cheques and falsely presented them as duly authorised to facilitate the withdrawal of company funds.

The court released him on a bond of Sh10 million with one surety of a similar amount or, alternatively, a cash bail of Sh3 million.

As part of the bond terms, Busaidy was ordered to deposit his passport with the court, seek permission before travelling outside the country and refrain from contacting or interfering with witnesses in the case.

The court also issued summons to other accused persons who were absent during the proceedings, including the chief executive officers of KCB Bank, NCBA Bank and Co-operative Bank of Kenya Limited.

The court has stopped the plans.

The matter will be mentioned on August 11, 2026, for the appearance of the other accused persons and for pre-trial directions.