Talk about fraud in banking circles and one will inevitably hit a raw nerve. That became apparent this week when Awoko Business paid visits to several banks to investigate the reasons behind the growing number of insider-fraud within the Commercial Banks in Sierra Leone.
In the last four months alone, the CID’s Economic and Financial Crime Unit (EFCU) has investigated dozens of fraud cases all directly linked to employees of several commercial banks in the country.
In the past week alone there were Press reports of cases involving employees from Access bank, Ecobank Microfinance and Skye bank all involving figures above fifty million Leones (Le50million).
Besides the normal tampering of clients accounts by bank employees, the fraud that is giving the banks serious headache in recent months, is the one in which employees connive with relatives or friends to defraud the banks.
Speaking to Awoko Business amid mounting concerns from the Bank of Sierra Leone about the alarming number of fraud cases, a Managing-Director who has asked not to be named disclosed that his bank has decided to put a temporary hold on disbursement whilst they revamp their system. He said, “We are looking again at how procedures and controls for approving and releasing loans to applicants are done.” He added, we have put in place measures so that we can actually cross-check and double-check properly; not that there were not proper measures, but it can be difficult sometimes when it involves in-house connivance.
The Bank MD explained that what usually happens is that an application for a microfinance loan will be submitted by a member of the public to the bank. On the application all the necessary information required by the bank will be supplied by the applicant and the bank will cross check this information and in most cases visit the applicant.
However, after the loan has been approved and funds released, the terms and conditions of the loans are breached and there are no repayments to the bank. But “the frequency of this and the pattern, trigger my gut feelings that something was wrong” he lamented.
Upon further investigations he said which includes visits to the addresses on the applications, the bank discovers that they have been the victim of fraud. He disclosed that “investigations by the bank’s Internal Auditors discover that most, if not all of this kind of fraud involves members of staff of the bank, who push their relatives and friends to apply for the loans and then having received the loans the applicant simply moves house and disappears”.
He conservatively estimated that the figures involved in the various fraud cases is just under eighty million Leones (Le.80 million.) He disclosed that the fraud has gone un-detected because they tend to apply for small amounts in drips, which discourages thorough checks. On the issue of police investigations, he said that the bank is happy with the results so far and that there have been some imprisonments in recent years of both employees and their collaborators.
Pressed on the issues of procedures and controls within the bank, the bank MD maintained that there are stringent rules and measures applied by his establishment to all applications but lamented that “if you look at society now, the values we had when we were coming up, do not really fly with the present young people nowadays, and this is because of the kind of role models we have today.” He went on to observe that; “Present day society have wrong role models-people who have been involved in corrupt practices-they are rich, drive big fancy cars and have flamboyant life styles, in just few years of working or doing business.”
“Back then when we were growing up, we had men and women who will work for over 30 years before they finish their house, and then they retire with respect, but nowadays, what is in the vogue is you make money as fast as you can – so that is the issue and it’s a societal problem, it’s not just a banking problem,” the Bank MD said.
It is no gainsaying that the high incidences of fraud in the commercial banks is likely to undermine the confidence of depositors and consequently impact negatively on the stability of the industry itself.
Inside sources at the Bank of Sierra Leone (which is the regulator of all commercial banks in the country) have hinted that the frequency of these fraud cases has not been lost on the bank. As a result the Central bank has been forced to introduce measures to help sanitize the industry.
As a first step, some commercial banks who spoke on condition of anonymity disclosed that they have received a letter from the Central Bank asking them to forward to them (central bank) the names of all employees who have either resigned or been sacked and a detailed report or information including the reasons for either their resignation or sacking.
The letter is reported to have further urged the commercial banks to freely share information among themselves about employees who are leaving their bank and moving onto the other banks, when the new employing banks request such information.
The central bank it has been reliable learnt has also instituted a “Black Book” in which the names are recorded of all staff members who have been sacked by any one of the 13 Commercial Banks in the country as a result of fraud.
Also a “fit and proper test” is now being conducted on all senior level officials of all the Commercial banks and the information in the Black Book is expected to form the basis of a “fit and proper test” for employees in the banking industry in Sierra Leone.
One banker Awoko Business spoke to said; “There is a phenomenon of people being able to literally walk down the street to another bank and get hired. This new database and “black book” is going to prevent that kind of thing happening.”
They welcome the Bank of Sierra Leone’s effort in this matter and pointed out that in future banks will also try to verify genuineness of property title documents submitted as security for loans, especially for large value loans, as according to a senior Bank Manager, the banks are also having problems on that front.
Although officers at the Economic and Financial Crime Unit refused to comment or release details of the frequency and sums of monies involved in the fraud cases they have investigated and are presently investigating this year, usually informed sources say it might be in the region of three billion Leones (Le3 billion).