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Banks lose 2.4% of revenue to fraud

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The Deputy Governor, Financial Systems Stability, Mr. Adebayo Adelabu, on Thursday said 2.4 per cent of banking revenue was lost to fraud cases.

Adelabu said the 2013 Global Fraud Report showed that Africa had the highest regional level of fraud losses, with about 2.4 per cent of revenue lost to fraud.

He spoke at the 2014 compliance conference held in Lagos by the Committee of Chief Compliance Officers of Banks in Nigeria

Quoting from the report, Adelabu said, “The 2013 Global Fraud Report revealed that Africa had retained its position as the region with the largest fraud cases, while sub-Saharan Africa maintained the unenviable position of the region with the most prevalent fraud problems (77 per cent), among the regions surveyed.

“It also had the highest regional figures of physical assets theft (47 per cent), corruption (30 per cent), regulatory or compliance breaches (22 per cent), internal financial frauds (27 per cent) and misappropriation of organisational funds (17 per cent). No wonder it also had the highest regional level of fraud losses (2.4 per cent of revenues).”

Adelabu, who left the banking sector a few months ago when he was appointed a deputy governor at the CBN along with the new Governor of the CBN, Mr. Godwin Emefiele, said the lenders had recorded more fraud cases because of internal collusion with bank officials.

“We have recorded high success rate of frauds from this class of individuals just with collusion of bank officials. In fact, before I left banking, we had started seeing the incidences of more internal frauds than eternal; which means it is very difficult to curb,” he noted

He added, “It is those who know your systems and controls that compromise to assist external fraudsters. If banks can find a way to minimise the cooperation of their employees with these fraudsters, there is going to be a reduction in the number of successful fraud cases.”

The former executive director at First Bank of Nigeria said while fraud and corruption were international in coverage, they had become predominant in the third world countries, including Nigeria, as a result of perverse incentives.

He noted that fraud and corruption were committed by those mostly entrusted with high positions or public funds.

In order to overcome the challenges, Adelabi advised the financial institutions to keep close check on transactions involving high risk customers such as politically exposed persons and financially exposed persons.

The CBN deputy governor listed factors responsible for the increasing cases of fraud as poor social value; continuous advancement in technology without commensurate emphasis on capacity building in banks and other companies; inadequate laws or poor implementation of legal/regulatory provisions for fraud cases; insatiable appetite for wealth among individuals and poor moral upbringing of children; and banks’ poor or faulty staff recruitment processes, poor conditions of service; and weak internal controls.

The Chairman, CCCOBIN, Mr. Pattison Boleigha, noted that the recent rebasing of the nation’s Gross Domestic Product, which made the economy the largest in Africa, would come with a lot of benefits, including an increase in Foreign Direct Investment.

He, however, noted that the development had also opened the economy to international fraudsters adding that corruption might become even worse.

As a result, Bolegha said the CCCOBIN chose fraud as the theme of the conference to further buttress the role of banks in fighting laundering of proceeds of frauds in the country.

He added, “We think there is huge benefits in the sharing of skills and experience with European, American and Middle Eastern compliance professionals to build capacity and strength in the fight against corruption and fraud.”

According to the Chairman, Nigerian Drug Law Enforcement Agency, Mr. Ahmadu Giade, banks are the target of transnational organised crimes.

He noted, as in other countries, drug monies were being used to finance terrorism.

Giade, who was represented by the Director, Financial Assets and Investigation, Mr. Olugbenga Madu, said, “We need to learn from the challenges of some big global banks. In 2012, the HSBC was fined by the United States authorities $1.9bn. This bordered on compliance issue on drug money. It had to do with how $7bn drug money was moved from Mexico to the US and the transaction was not treated as a suspicious one by the bank.”

He added, “It has been established that drug money is second to oil revenue. It has also been established that drug money that is laundered is also being used to fund terrorist organisations. We hear about the Lebanese Canadian bank that is assisting the Hezbollah. We need to look at Nigeria. It is happening but it just that you have not known.”

Article Credit: Punchng

Updated 5 Years ago

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