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Experts link rising bank fraud to weak controls, poverty

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By Elizabeth Adegbesan

FINANCIAL sector experts have blamed the rising incidences of insider-related fraud cases in banks on poverty and weak internal control measures in banks. Recall that the Nigeria Deposit Insurance Corporation, NDIC, in a recent statement disclosed that fraud cases attributed to internal abuse by banks’ staff rose by 39 percent to 320 in 2017 from 231 in 2016.

The Corporation also accused banks of inadequate rendition of returns on instances of fraud, forgeries, and cases involving members of their staff who were either dismissed or had their appointments terminated on grounds of fraudulent activities.

Speaking to Financial Vanguard, Dr. Uju Ogubunka, President, Bank Customers Association of Nigeria, BCAN, attributed this development to ineffectiveness of banks and lack of electronic fraud awareness by bank customers. He said, “This development implies that banks’ internal control measures are weak and ineffective. In cases of fraud, the banks will lose money and the customers would also lose money. On the part of customers, the problem of the occurrence of electronic fraud is due to the customer’s lack of information on how to use the e-payment channels. That is why they end up being caught in the net of fraudsters such as phishing and so on. If the banks have solid internal control measures, they would be alerted if there is any breach in the accounts of customers.”

On his part, past Chairman, Committee of Chief Compliance Officers of Banks in Nigeria, CCCOBIN, Mr. Pattison Boleigha, cited abject poverty as the main driving force behind the insider related fraud cases. He noted, “I agree with you that fraud occurs because of the weaknesses, lapses and ineffectiveness in the banking system’s control measures, however, it is not because of lack of efforts by the banks to curtail this menace. The regulators have also come up with several regulatory pronouncements particularly in the area of electronic banking.

“The weakest link in any system that will cause things like fraud is people issues. As long as it has human beings, whether they are weaknesses or inefficiency of bank or staff, the bottom line is that most of the frauds were perpetrated by staff, that is the largest weakness in the chain of issues in any company.

“What are the typical characteristics of individuals’ today particularly in Nigeria? The entire system is stressful. There is abject poverty out there. There is abject lack. We have become providers of social comfort ourselves without government support.”

Former President of Chartered Institute of Bankers of Nigeria, CIBN, Professor Segun Ajibola, however frowned at banks’ unwillingness to report staff culpable of fraudulent activities.

Speaking at a recent conference organised by the Financial Institutions Training Centre, FITC, in Lagos, Ajibola said:  “I also appeal to operators here, let us cooperate with what the CIBN and the CBN are doing on ethics. We don’t make enough examples of people whenever it happens. We prefer to let them go quietly than reporting them. If we report them to the authorities, the CIBN, if such a person were to be a registered member, there is such procedure for dealing with such person and making him or her, an example for the system to know. But when we try to cover up, we recycle people with serious ethical issues. This is not helping the system. We don’t report enough. By the time somebody commits fraud and we say we don’t want to advertise ourselves and we let him go. It is not helping the system.”

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