Nigeria: Banks Lost N1.401bn to Forgers and Fraudsters in Six Months
Fraudsters and forgers went on the rampage in the banking industry in the first half of 2007 successfully stealing N1.401 billion from the banks, even as quality of loan facilities deteriorated in the industry.The half year annual report of the Central Bank of Nigeria (CBN) released last week revealed this stating, "A total of 741 cases of attempted fraud and forgery, involving N 5.4 billion, US$35,406.1, 150.00 and £60.0 were reported, up from 597 cases in the corresponding period of 2006".The 438 cases that were successfully executed resulted in the loss of Nl .4 billion, US$ 13,938, 150.0 Euro and £60.0 to the banks, compared with 295 cases and the loss of N1 .2 billion, US$455,549.0, and £10,000.0 during the corresponding period in 2006.
The CBN attributed the rising wave of fraud and forgery in the industry to the weaknesses in the internal control systems of the banks and the delay to fully integrate their systems and processes.In a related development the apex bank reported deterioration in the quality of loan facilities granted by banks. According to the report, "An assessment of the banking sector soundness using the CAMEL parameters revealed that as at end June2007, six (6) banks were rated sound, sixteen (16) satisfactory, and three (3) banks were rated marginal. No bank was rated unsound, reflecting the positive results of the consolidation exercise.
The non-performing loans of the banks rose from N209.8 billion at end-June 2006 to N254 billion, reflecting a deterioration in the quality of loan facilities.The ratio of non-performing credit to industry total credit was 7.7 per cent as at end-June, 2007 as against 9.7 per cent recorded at end-June, 2006. The ratios were below the acceptable contingency threshold of 2.0 per cent for the industry.
A banking operator recently blamed the rising incidence of frauds in the banks to the weakness of the existing banking laws to deter frauds in the industry.Speaking on the role of regulatory authorities in combating fraud in the banking industry, at the workshop on Internal Audit and Accounting Control Measures in the Mortgage Banking sector organized by the Mortgage Banking Association of Nigeria (MBAN), Managing director/chief executive Omega Savings and Loans Limited, Mr Effiong Bassey stated that, "Laudable as they may be, the existing laws-BOFIA, FMBN, NDIC e.t.c cannot deter fraudulent persons unless their provisions are strictly implemented and law enforcement agencies must decisively prosecute any established fraudster.
In addition to this, delays in prosecution process must stop, while connivance with fraudster to cause their escape from lawful custody must be addressed as well as tampering with evidences by enforcements agents for financial gains from fraudsters.Bassey noted that it is difficult to actually know the trend of fraud in the industry due to absence of a uniform reporting system.
"Some banks report only successful frauds to the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC), other report both attempted and successful ones while others report none for fear of damaging their images. This not withstanding, fraud has been on the increase with all cadres of staff involved in it.
This rising incidence of fraud is due to a host of factors among which are: Non-call over of transactions, Poor record keeping, Non-identification of Payees of instruments, Absence of Dual control, Non-adherence to cash holding limits, and wrong staff placement/non-rotation of duty.
To address the incidence of fraud in banks,he suggested adequate background checks on prospective employees, adding that integrity test must begin from recruitment, as the obtaining of a good grade does not mean hard work or honesty.
Furthermore he recommended: Adequate staff training. Adherence to guidelines given by regulatory authorities and bank's operational guidelines and manuals.Assignment of duties to staff on the basis of ability. Passionate reward for fraud detection and prevention. Conclusive prosecution of identified fraudsters. Adequate staffing to eliminate comprise of roles. Competitive remuneration to elicit unalloyed loyalty. Accurate book/record keeping to ensure the regular reconciliation of accounts. And Surprise checks and rotation of staff to eliminate complacency.
The CBN attributed the rising wave of fraud and forgery in the industry to the weaknesses in the internal control systems of the banks and the delay to fully integrate their systems and processes.In a related development the apex bank reported deterioration in the quality of loan facilities granted by banks. According to the report, "An assessment of the banking sector soundness using the CAMEL parameters revealed that as at end June2007, six (6) banks were rated sound, sixteen (16) satisfactory, and three (3) banks were rated marginal. No bank was rated unsound, reflecting the positive results of the consolidation exercise.
The non-performing loans of the banks rose from N209.8 billion at end-June 2006 to N254 billion, reflecting a deterioration in the quality of loan facilities.The ratio of non-performing credit to industry total credit was 7.7 per cent as at end-June, 2007 as against 9.7 per cent recorded at end-June, 2006. The ratios were below the acceptable contingency threshold of 2.0 per cent for the industry.
A banking operator recently blamed the rising incidence of frauds in the banks to the weakness of the existing banking laws to deter frauds in the industry.Speaking on the role of regulatory authorities in combating fraud in the banking industry, at the workshop on Internal Audit and Accounting Control Measures in the Mortgage Banking sector organized by the Mortgage Banking Association of Nigeria (MBAN), Managing director/chief executive Omega Savings and Loans Limited, Mr Effiong Bassey stated that, "Laudable as they may be, the existing laws-BOFIA, FMBN, NDIC e.t.c cannot deter fraudulent persons unless their provisions are strictly implemented and law enforcement agencies must decisively prosecute any established fraudster.
In addition to this, delays in prosecution process must stop, while connivance with fraudster to cause their escape from lawful custody must be addressed as well as tampering with evidences by enforcements agents for financial gains from fraudsters.Bassey noted that it is difficult to actually know the trend of fraud in the industry due to absence of a uniform reporting system.
"Some banks report only successful frauds to the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC), other report both attempted and successful ones while others report none for fear of damaging their images. This not withstanding, fraud has been on the increase with all cadres of staff involved in it.
This rising incidence of fraud is due to a host of factors among which are: Non-call over of transactions, Poor record keeping, Non-identification of Payees of instruments, Absence of Dual control, Non-adherence to cash holding limits, and wrong staff placement/non-rotation of duty.
To address the incidence of fraud in banks,he suggested adequate background checks on prospective employees, adding that integrity test must begin from recruitment, as the obtaining of a good grade does not mean hard work or honesty.
Furthermore he recommended: Adequate staff training. Adherence to guidelines given by regulatory authorities and bank's operational guidelines and manuals.Assignment of duties to staff on the basis of ability. Passionate reward for fraud detection and prevention. Conclusive prosecution of identified fraudsters. Adequate staffing to eliminate comprise of roles. Competitive remuneration to elicit unalloyed loyalty. Accurate book/record keeping to ensure the regular reconciliation of accounts. And Surprise checks and rotation of staff to eliminate complacency.
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