The 2019 Banking Industry Fraud Report and a front-page banner publication in Business & Financial Times (B&FT) on Monday, August 17, 2020 titled “BoG orders police vetting of bank staff to curtail fraud” has precipitated a research into the issue and the publication of this article.
The Business & Financial Times (B&FT) publication stated that “to reduce the alarming cases of staff-orchestrated fraud in banks, the regulator – Bank of Ghana – has ordered banks to take a raft of measures, which include taking staff through police vetting to determine whether they have any criminal history before employing them.” The publication touches deep on ethics and professionalism in banking.
There is no gain saying that banking thrives on the confidence, poise and self-assurance that stakeholders, customers, and clients have in bankers. Apart from the knowledge, skills and technical expertise the professionals in the industry possess there is the need to be of high integrity in order to gain the confidence of investors and other clients.
Banking is a business, which is based on trust. People entrust the care and management of their funds to bankers because they trust the bank. Customers have faith and confidence in banks hence are able to transact business no doubt of flaws. That is why it is said that the role the banker play in the financial services industry is one of “stewardship, based on trust”.
The more the people who have confidence and trust in bank the better it is for the business of banking. This understanding gives connotation to the perennial question of what to look for in the persons employed to handle other people’s monies in the banks – should it be competence or character, or both?
In the practice of banking, it is more important to have personnel who bring to the profession a firm sense of morality and commitment of high ethical standard and social responsibility. Those who do not pay attention to competence in dealing with ethical issues in the financial services industry pay heavily in the loss of reputation and trust when caught doing what they are not supposed to do.
Such negative acts and unethical behaviors can mean an end to an individual’s career or drive away the business of the bank. Nobody wants to deal with a company that cannot be trusted or with a person whose word cannot be reliable.
It is clear why in the banking industry premium is placed on the need for a firm sense of morality and a commitment to high ethical standards and social responsibility. This ethical quality is needed in all those who work in the financial services industry in general as well because, in the financial services industry employees – whose art and act of work are the primary concern of the Chartered Institute of Bankers, Ghana – are often exposed to moral dangers of a dimension not often found elsewhere.
“Money is sticky stuff”. It has a mystical attraction – something in everyone wants to hang on to money. So, while it is not to be condoned, it is hardly surprising that those who work in the financial heart of society may be vulnerably exposed to the lure of money. The lure of money rooted in materialism possess a danger for individuals personally and to many magnates of companies.
Financial services industry operations is about money management and therefore there is a strong temptation for some individual practitioners and companies to think that their main business is to make money in the market and so, worldwide, the world of finance has its fair share of greedy, ruthless people who do strange things in the interest of short-term personal goals.
There is always a competition to make money in the market instead of helping to make a market in money and the struggle to find a comfortable position in the market. This struggle can bring out the worst in people. For some companies achieving the bottom line and hitting the numbers is all that matters – all other thing can wait!
It is on account of this fact of life that the Institute agrees with other ethical philosophers that: “Historically, unethical behavior, is unfortunately an integral part of the financial world.” While this may be so a bank places itself at a disadvantage if it is not seen to be doing anything about venality (the quality of being open to bribery or overly motivated by money) in its services delivery.
Ghana cannot afford to have its financial services industry dominated by bad practices. We need to conduct our business in a way that will command the respect of world rating and ranking bodies and win the confidence of investors and clients both local and foreign.
In any case, our banking practitioners will have to decide for themselves whether or not they want to be part of a system which does not enjoy the respect and confidence of society or be part of an ethical and professional banking system. This decision is crucial because ethical conduct and social consciousness can only begin with the individual practitioners.
It is against this background that this publication by the Institute is been presented. The Institute is concerned about the recent developments of unethical practices of banking professionals who engage in insider trading, hostile liquidation, ethics and ecology. And other everyday concerns of ethical hiring, promotion and firing practices, work safety and privacy, whistleblowing, gifts and entertainment, truth and advertising, product safety and so on.
Readers will realize that these are some of the issues, which create ethical dilemmas and moral temptations for practitioners in the banking space.
For, sometimes when attention has been drawn to conduct which appears unethical, reactions have taken several dimensions: some have genuinely wondered what the hassle is all about; others have said, “who cares?”, others have blamed it all on the lack of well-defined business policies and procedures and simply said they did not know they were doing what they were not supposed to do; still others have said they did not know where to draw the line; some have asked “was it illegal?”. Some have wondered; and so on.
The Institute is making this submission not to point an accusing finger at any individual of the bank or at any bank in Ghana, but to make the point that in the matter of ethics, all of us are at risk and vulnerable.
The Institute has observed that the problem arises because of: a lack of understanding of the ethical issues at stake, or an inability to make a distinction between what is appropriate and inappropriate, or both. This presentation is to prescribe to members that ethical issues constitute an important part of the conduct of financial services and understanding the need for members to develop competence in dealing with ethics issues in the financial services industry in Ghana.
No one should be deluded into thinking that reading this publication on ethics in the financial services industry will dissolve all our problems. However, it must be emphasized that the presentation is an extract of the Institute’s Code of Ethics and Banking Conduct and has the following extracted objects: it should help readers and members of the Institute to get a better appreciation of the link between good ethics and good business; it should help readers and members of the Institute to develop analytical problem-solving skills and the ability to apply moral reasoning, which takes into account a variety of views, cultural norms and values.
It should also help readers and members of the Institute recognize ethical dilemmas and moral temptations and know when, for example, anyone is getting involved in conflict of interest, becoming beholden to a supplier or contractor, saying things that you know are not true, taking things which do not belong to members and alerting friends and family before information becomes generally available.
A clear understanding of the Institute’s Code of Ethics and Banking Conduct will help readers and members of the Institute to remove all doubts about what is expected of practitioners, and so on. All of which should make readers and members of the Institute ethics-conscious comparative to just as banks and bank professional practitioners are cost-conscious. This will help to retain the confidence and trust of investors, clients and stakeholders in the banking sector.
There is a basic understanding that a bank is a financial institution that accepts deposits from the public and creates a demand deposit, while simultaneously making loans. Due to the importance of banks in the financial stability of a country, most jurisdictions exercise a high degree of regulation over banks.
Most countries have institutionalized a system known as fractional reserve banking, under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, the Basel Accords.
The Institute is rather very challenged about the reports of rampant bank frauds being perpetrated by banking employees in recent days. It looks like the banking employees, practitioners and professionals are disregarding all the ethics and banking standards and rather using potentially illegal means to obtain money, assets, or other property owned or held by the banks, and are obtaining money from depositors by fraudulently posing themselves as banks or other financial institutions.
The Institute will like to emphasize that, bank fraud is a criminal offence and shall not condone or mate with employees who commit criminal offences. The Institute appreciates that banks face a number of risks in order to conduct their business, and how well these risks are managed and understood is a key driver behind profitability. That does not give room to embrace fraudsters and criminals in the banking profession.
The 2019 Banking Industry Fraud Report stated a total number of 2,295 fraud cases as compared to 2,175 fraud cases reported in 2018. According to the Report, the marginal increase in the number of fraud cases reported may partly be attributed to the improved efforts by the Financial Stability Department to identify, monitor and to ensure compliance with reporting of fraud cases in the industry.
Notable increase in the number of fraud cases reported is cheque cloning, originating from the operation of syndicates involving staff of financial institutions, telecommunications companies and cheque-printing houses.
Suppression of cash and deposit reported in the year 2019 increased by 43.18 per cent from 1,239 cases in 2018 to 1,774 cases in 2019. In 2019, the total value of reported cases under this fraud type was GH¢5.05 million, with a loss amount of GH¢4.07 million. Approximately 93.7 per cent of total reported fraud cases (Suppression of cash and deposits) were committed by staff (contractual or permanent) or other insiders. Usually ‘frontline staff’, particularly tellers, mobile bankers or sales agents.
It must be reiterated that Ghana is still licking the wounds from its banking challenges where seven banks were closed within the space of one year, and about 2,700 jobs were impacted and government piled onto its debt +- GH¢7.9 billion (US$1.7 billion) to pay for the difference between liabilities and assets of the collapsed banks to allow other lenders take them over.
In order to support the Banking Sector to thrive in difficult times, having considered all the Directives issued by the Bank of Ghana and the Conduct of Business Standards and the Banking Code developed by the Ghana Association of Bankers to rectify these ethical deficiencies among banking employees, the Chartered Institute of Bankers, Ghana has drafted a Code of Ethics and Banking Conduct to help shape and improve ethics and professionalism among bankers.
The document contains principles and guides to acceptable banking behaviors and moral principles that govern bankers’ behaviors and life. The document addresses questions such as: what sort of person should I be? How should I live my life? And What personal characteristics are reprehensible and must be avoided or suppressed? This Code is made under the Chartered Institute of Bankers Act 2019, (Act 991). The overall objective of this Code is to ensure strict adherence to best banking practices and maintain high ethical and professional standards within the Banking Industry in Ghana.