In the relentless battle against financial crime and money laundering, banks face a formidable adversary that often goes unnoticed – their own employees. An internal threat can pose a more significant risk to a bank than its customers, especially when staff members aid and abet criminal activities. Despite stringent processes and procedures implemented by banks, employees still find ways to circumvent them – putting their colleagues and the institution itself in jeopardy. This article sheds light on the alarming activities that suggest employees may be exploiting the bank’s resources to their personal advantage, causing financial losses and tarnishing the bank’s reputation.
Employee Misconduct
Trade/Fixing Forex Rates: In the Treasury and trade space, sinister activities often lurk beneath the surface. Some employees exploit their position to manipulate forex rates, benefitting themselves at the bank’s expense. These unethical practices undermine the banking system’s integrity and distort fair market conditions.
Customer Account Takeovers: Employee involvement in customer account takeovers is a disturbing trend that threatens both the bank and its clients. By fraudulently booking loans and conducting transactions without customer consent, employees compromise the security and trust that customers place in the bank.
Assisting in Issuance of Fake Account Statements: Some unscrupulous employees collude with customers to produce counterfeit account statements for visa applications. This fraudulent act not only deceives embassies but also exposes the bank to legal and reputational risks.
Fixing Lower Rates on Channels: Certain employees manipulate interest rates on various channels, providing an avenue for misuse and exploitation. This misconduct undermines the bank’s efforts to ensure fair and transparent financial services, potentially leading to significant financial losses.
Lavish Lifestyles Inconsistent with Earnings: The extravagant lifestyles of employees that surpass their known earnings raise red flags. Colleagues who witness such behaviour should be encouraged to anonymously report suspicious activities, as this could unveil hidden fraudulent schemes and protect the bank’s interests.
Exploiting Weaknesses in Internal Processes: Employees who actively seek out and exploit vulnerabilities in internal processes pose a significant threat to a bank’s security and stability. By identifying and capitalising on weaknesses, these individuals enable financial crimes and undermine the institution’s safeguards.
Addressing the Internal Threat
The Bank of Ghana recently published data on the various fraud schemes in Ghana. While the general outlook shows a slight improvement in fraud rates compared to the previous year, the involvement of employees remains a concerning and distracting point. To combat this internal threat effectively, banks must foster an environment wherein employees actively look out for one another. Banks must:
Cultivate a Culture of Vigilance: Encouraging employees to watch for any suspicious activities and report them promptly is crucial. Establishing anonymous reporting mechanisms, whistleblower protection, and fostering an open dialogue about ethical conduct can help employees feel empowered to report potential wrongdoing.
Strengthen Internal Controls: Banks must continuously review and enhance their internal control mechanisms to detect and prevent employee misconduct effectively. This involves investing in robust monitoring systems, conducting regular audits and ensuring strict adherence to compliance standards.
Enhance Employee Training: Comprehensive training programmrs should educate employees about the latest trends in financial crime, money laundering techniques, and the severe consequences of their involvement in illicit activities. Emphasising the importance of ethical conduct and promoting a strong compliance culture is vital.
Implement Strict Access Controls: Limiting access to sensitive information and financial systems based on an employee’s role can minimise the risk of unauthorised activities. Regular access reviews and segregation of duties should be enforced to prevent collusion and unauthorised transactions.
Change of job schedules and transfers from roles and locations: Regularly changing job schedules and transferring employees between roles and locations has been proven to have multiple benefits. It contributes to the professional growth and development of employees by exposing them to different tasks, responsibilities and work environments. Job schedule changes and transfers can also act as a mechanism for uncovering irregularities exhibited by employees; particularly in cases where the employee holds operational roles and has access to financial transactions. It is also crucial for banks to ensure that their employees utilise their annual leave, as employees who consistently avoid taking regular vacations can pose a potential risk to the bank.
Sanctions: Banks must fully implement their sanctions regime on employees who bypass internal processes and procedures, serving as a warning to those who may have intentions of engaging in similar actions. It is essential to acknowledge that when misconduct goes unpunished, employees may feel emboldened to intentionally commit operational mishaps – leading to potential financial losses or reputational damage for the bank. There are also sanctions for employee misconduct as outlined in the BoG/FIC AML/CFT administrative sanctions document.
Conclusion
The greatest threat to banks in combatting financial crime and money laundering often resides within their own walls – their employees. By engaging in illicit activities that exploit the bank and its resources, employees compromise the institution’s integrity, financial stability and reputation. The fight against employee fraud demands a united front, with employees actively looking out for each other and reporting any suspicious behaviour. By implementing rigorous internal controls, fostering a culture of vigilance and providing comprehensive training, banks can mitigate the risks posed by their own personnel and safeguard the interests of their customers and stakeholders.
James is an Anti-Money Laundering Specialist with an interest in financial crime, employee conduct, and process improvement to ensure integrity of the financial system.
