NEWSPAPER reports that banks lost as much as N21.29 billion to fraud and forgeries in 2010 are worrisome, not only to the banking public but also an embarrassment to the banking industry.It is an indication that all is not well with the banking industry in spite of the continuous reforms being carried out by the Central Bank of Nigeria (CBN).The Nigerian Deposit Insurance Corporation (NDIC) in its Annual Report for 2010 said there were 1,532 reported cases of attempted fraud and forgeries involving over N21 billion during the year under review. This was against about 1,764 reported cases in 2009 involving over N41.26 billion.Although there was a marked decrease of about N19.97 billion or 48.4 per cent compared to the 2009 figure, the fact that as much as N21.29 billion was lost to fraudsters in a single year is saddening in that more than 100 years after banking was introduced in the country, banks are still losing huge amounts of money annually to dishonest acts. Except strict measures are taken, such incidences of loss of depositors' money could over time lead to loss of confidence in the banks.NDIC analysis of the types of fraud and forgeries perpetrated during the year under review showed that the common types of deception were Automated Teller Machine (ATM) fraud, fraudulent transfers/withdrawals, lodgement of forged warrants, presentation of forged cheques, suppression of customer deposit, granting of unauthorised credits and outright theft.The high degree of ATM-related fraud is also a testimony that the country is still not quite ripe for the use of high technology banking devices. Such high ATM-related fraud when put against the background of CBN's proposed introduction of cashless banking is an indication that it could lead to increase in such anti-social activities.In particular, the high illiteracy rate in the country especially among operators in the informal sector of the economy shows that a lot would need to be done to save them from perpetrators of ATM fraud. Many illiterate market women and micro-business owners have in the past fallen victims of perpetrators to fraudsters. Poorly educated business owners forced to use ATM cards and have to rely on third parties to do their banking transactions, thus possibly exposing their Personal Identification Numbers (PIN) to fraudulent third parties. This is an aspect of banking that needs to be in-depthly reviewed if the cashless banking policy is to be fully implemented in Nigeria. Banks must be willing to invest in educational initiatives to ensure that customers know how to independently use their ATM cards.It is also unfortunate that N11.68 billion or 52.4 percent of the N21.29 billion lost to fraud was not covered by Fidelity Insurance Bond or any insurance policy and therefore a complete loss to the banks. The lesson for the banks is that they would need comprehensive insurance on depositors' money to avoid such colossal loss as a result of frauds and forgeries perpetrated against banks. The persistent acts of fraud perpetrated against banks could lead to lack of public confidence in banks. Banking is based on trust and confidence. When a bank loses public confidence, it could lead to ruin of such banks and members of the public seeking alternative ways of securing their funds. The undue exposure of banks to dastardly robberies anytime of the day is also a sign that banks would need to actually take 100 per cent fidelity insurance on their depositors' money.Often times, bank workers collude with external persons to defraud the banks. It is therefore not surprising that as many as 357 bank workers in 24 Deposit Money Banks were involved in fraud during the year under review. The high number of bank workers involved in fraudulent activities brings to the fore the poor internal control systems in the banks and their inability to arrest such frauds. It also calls to question the recruitment processes. Henceforth, those to be made inspectors in the banks should be people of impeccable character who could resist the temptation to either steal or defraud their banks, or condone such activities while Chief Inspectors must in addition be of General Manager competence, so that they would not compromise their positions for easy funds.That bank workers could easily engage in deceitful activities calls to question the moral values of such persons. It is also an indictment on the recruitment process without adequately checking their family background and references supplied. It would appear that in recruiting their staff, banks place more emphasis on paper qualifications obtained at the expense of many moral factors such as family background, moral rectitude and guarantee of good behaviour from verified references. There should be a way forward to reduce these kinds of behaviour in the banking sector. At the same time, banks also would need to do thorough due diligence on applicants to be employed and check their references before they are engaged to work in the banks. The entire recruitment process must be revised with a view to strengthening it to remove any loopholes and prevent acts of internal conspiracy.A situation where a significant percentage of bank frauds are insider-induced is an indictment of the Management of the banks as it shows that they are only interested in collecting deposits from their customers and less concerned with the safety of their customers' money. Hence, it is in their best interest to urgently redress these loopholes which have seen them lose billions of Naira to fraudulent activities.
Click here to read full news..
