Lessons to learn from the Bank Of Ghana Fraud Reports of 2019 and 2020 (Part: I)

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Risk Watch with Alberta Quarcoopome: THE CLOSING BELL… end of year preparations by banks
Alberta Quarcoopome
  • “Rather fail with honour than succeed by fraud” …Sophocles

Last week marked the observance of International Customer Service week, celebrated by brands across the globe. On our local front some banks created unique ways of celebrating it with their customers. I also want to celebrate two persons who work quietly behind the scenes for their companies.

Appreciation to Mr. Samuel Blankson and Mr. Fred Kofi Annan

Not all bank staff have interactions with customers or with the general public, yet one should still work with professionalism as the hallmark. In my interaction with some staff of the Transport Division I have taken note and wish to celebrate two Drivers of financial institutions for their professionalism and great customer service. My first appreciation goes to Mr. Samuel Blankson, a Driver of Opportunity International Savings and Loans. I have had three encounters with him, feeling great with his service delivery.

hand clicking on an “Fraud alert” key
  • Timing and promptness……..check
  • Appearance ……..check
  • Greetings …….check
  • Informing me about the route he will take……check
  • Asking about my preferred air-condition level………check
  • Asking me about my preferred radio station…check
  • Driving Etiquette Check

My second appreciation was a short encounter with Mr. Fred Kofi Annan a Driver of Consolidated Bank. His professionalism was exhibited in several ways:

  • Greetings……check
  • Not picking phone calls while driving, except during a heavy gridlock in traffic and for which he apologized profusely. I had no problem with it.
  • Driving etiquette…….check.
  • All others….check, check.

It may sound very petty to you, and I do not celebrate people who are paid for what they should be doing ordinarily. Well, these small things do matter to me, because quite a number of people don’t do what they are paid to do! Kudos for brightening your corner, Samuel and Fred. Now back to my main topic.

The Bank of Ghana Banks and SDI (Special Deposit-Taking Institutions) Fraud Report

The latest Bank of Ghana Fraud Report for 2020, like the 2019 did not come as too surprising to some of us. Once again, after the noise in the media, everything has quietened down, or maybe swept under the carpet. I hope not. The fact that more than fifty percent of the fraud reported are from internal sources, like the global scenarios, is worrying.

All Universal banks, Microfinance companies, savings and loans companies as well as rural and community banks are expected to submit fraud reports to Bank of Ghana. Submission of fraud returns for 2020, recorded a slight improvement. The banks continued to maintain a 100% rate of submissions and the rural and community banking sector recorded a remarkable increase of 75% in the rate of submissions. From these submissions, the Bank of Ghana has identified various fraud types as some operational risks financial institutions face in relation to carrying out effective banking.

Banking is a very dynamic industry, and the sources of the fraud are varied, (internal and external).

Wise words from Mr Julian Opuni

The CEO of Fidelity Bank and a Fellow of the Chartered Institute of Bankers, Ghana, Mr. Julian Opuni, recently emphasized, in an interview by the Business and Financial Times newspaper about the Fraud report, that “Banking ethics are as crucial as profits and other KPIs. Without proper adherence to ethical guidelines as the Ghana Banking Code of Ethics and Business Conduct, banks and businesses will be doing a great disservice to their businesses.”

Key Highlights of the Report

  • “The most significant fraud types recorded in 2020, with respect to incidence and/or loss to the banking sector are Fraudulent withdrawals, E-Money Fraud and ATM/POS Fraud”.
  • “The Reported value of fraud for 2020 was GH¢1.0 billion, as compared to GH¢115.51million recorded in 2019. The notable increase in the value reported was as a result of high values recorded in attempted correspondent banking fraud (forgery of SWIFT advice). Even though the banking sector did not suffer any losses from any of the correspondent banking fraud attempts, it posed a reputational risk to some banks, whose staff were found culpable in two of the three reported incidents”.
  • “Data recorded over the years shows a persistent trend of staff involvement in fraud. Despite the numerous notices of caution sounded out to the banking industry, in almost every fraud report issued since 2017, the phenomenon continues to increase”.
  • “In 2020 many routine activities of institutions including financial transactions that usually would have been undertaken in-person were conducted online. Customers who were not used to digital/electronic methods of making financial transactions were compelled to use them. Consequently, some sections of the banking sector were exposed to heightened levels of fraud related risk, due to the increased patronage of electronic/digital products and services.”
  • “Data recorded for 2020 showed that different sectors of the banking industry were impacted differently by the various fraud types. Some sectors seemed more susceptible to certain types of fraud than others. Fraud types such as Suppression of Cash recorded a higher impact on sectors such as, rural and community banks . Lending and Credit Fraud recorded a higher impact on savings and loans companies. ATM/POS fraud and Cyber/E-Mail Fraud recorded a higher impact on banks”.
  • “The percentage of staff involved in cash suppression in 2020 increased from 51.0% in 2019 to 56.0% in 2020. The heightening rate of staff involvement may be attributed to inadequate vetting processes of staff of financial institutions. Also, weak internal control systems that allow unauthorized staff to interact with customers, as well as unauthorized staff accessing confidential information and systems that should have been restricted to authorized personnel only, are the major contributory factors that lead to the escalation of this fraud type. Furthermore, the inadequate levels of remuneration for temporary staff engaged by banks and SDIs as a contributory factor to the recurring phenomenon of staff involvement in cash suppression fraud, cannot be overlooked”.

The Wake-up Call/Reminder

Fraud awareness creation in financial institutions should be a regular feature, both for their customers as well as all staff. This is a wake-up call or reminder for financial institutions to re-examine the systems in the institution for the following:

  • Are there standard operating instructions for all transactions? How often are these policies and procedures re-visited to ensure they are highlighted as a refresher for existing staff and a training document for new entrants? Are staff using these processes or using logic to work?
  • Are there red flags that signify weak internal controls, lack of segregation of duties and dual controls, or regular reconciliation and business checks?

The People Risk/Red Flags

Fraud is no respecter and any staff from the lowest to the top is capable of fraud. However, I recommend that supervisors and leaders watch out for the following people risks or red flags:

  • Opportunist fraudsters- exploiting laxity in controls
  • Disgruntled employees
  • Excessively ambitious people
  • Financially desperate people/staff
  • People with extravagant lifestyles
  • Extremely close customer/vendor relationship
  • Unusual or Change in Personality (ALCOHOL, DRUGS, SLEEP, IRRITABLE, DEFENSIVE, ARGUMENTATIVE)
  • Too good to be true performance
  • Excessive late closures
  • Living beyond Means
  • Poor Money management
  • Dissatisfied Worker, unable to Relax
  • No Vacations or Sick Time

Underlying all this is GREED.

Lessons on ATM frauds:

  • In these days of customers being directed to patronize digital banking, do not leave customers to their fate as they handle new products
  • In case of need, identify some service ambassadors to guide some customers through ATM usage, so they do not fall prey to fraudsters.
  • Security Guards should not be the ones to teach customers how to use ATMs
  • A walk-through with customers on their digital journey is a must.
  • Customers should be educated on security tips in handling ATMs.

Lessons on staff involvement in cash suppression:

  • Cash should always be under the control of joint custodians, with regular snap checks.
  • CCTV should be well- placed and back-ups always stored for easy retrieval
  • Cash in transit operations should always be jointly handled and safeguarded.
  • Supervisors of cash transactions should be well trained in teller management
  • All cash transactions should be documented and checked.
  • Background checks should be strengthened before recruitment especially in the case of outsourced staff.

I will pause here. For more insights into operational risk management, frauds and other relevant experiences, please book a copy of my new book, “THE MODERN BRANCH MANAGER’S COMPANION” which involves the adoption of a multi-disciplinary approach in the practice of today’s branch management. It also shares invaluable insights on the mindset needed to navigate and make a difference in the changing dynamics of the banking industry. Call 0244333051 for your copy.

TO BE CONTINUED

ABOUT THE AUTHOR

Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of Three books: “The 21st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story” and “The Modern Branch Manager’s Companion”. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud.

CONTACT

Website www.alkanbiz.com

Email:[email protected]alkanbiz.com  or [email protected]

Tel: +233-0244333051/+233-0244611343

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