The BoG fraud report: lets clear the weeds from the grass (Final)

By Alberta QUARCOOPOME

Dear readers, welcome to my final edition under the series of discussion on the 2023 Bank of Ghana published last month. Today we shall look at another risk area which can make or unmake banks due to the losses involved.

External Fraud

These frauds are caused by external parties over which the bank has no control.

Frauds by Customers Known Agents

Note: Known Agents are usually on good terms with front office staff and these are some of their fraudulent activities:

• Short paying cash deposits made for customers’ accounts
• Siphoning part of cash withdrawn by cheque during transit between the bank and employers’ premises.
• Forging signatures on employers’ cheques for personal gain.
• Collecting bank statements from the bank without employers’ authority
• Alteration of cheques issued by employers for diversion into other accounts

Identity theft

An example us the presentation of fake identities and documents for wrongful benefit. Letters of Administration can be used to perpetuate fraud, causing funds to be transferred or transmitted to wrong/unaccredited third parties.

Cheque Frauds

This type of frauds is one of the most common headaches for any branch manager because it accounts for a great proportion of bank losses. However, over the past five years, the percentage of loss from cheque frauds are reducing due to the reduction of cheque usage, being replaced by mobile money payments.

In our part of the world, despite the enhanced usage of mobile apps and digital payments, many corporate institutions continue to effect some payments through cheques.  This leaves several questions to be answered. The perpetrators could be any of these:

• Customers or their agents or employees.
• Insiders of the bank (bank employees) who provide the required cheque details and vital information on corporate and individual account holders to these fraudsters.
• Dubious employees of the security printing companies which provide confidential information about features of the cheques.
• The fraudsters, apart from making use of sophistication in ICT, also take advantage of weaknesses in the banking system

The cheque fraud quadrant is a sophisticated network made up of several parties, who come together to perfect their act. Bank insiders, fraudsters in the customer’s workplace, workers in cheque printing companies, fraudsters in telecommunications companies, as well as the main unknown architect/fraudster.

Preventing Cheque Fraud

Required identification should be taken when opening accounts.  The documentation required for opening accounts should be confirmed and references followed to ascertain their authenticity. Customers’ office/residential addresses should be checked and confirmed. Signature on IDs should be compared with what is indicated on the mandate form. Let’s be guided by the following basic steps:

• Confirm their phone numbers after the account has been opened.
• Follow up references especially for current accounts
• Check for multiple accounts in the same bank where the AML software us not in use
• Cheque book requested for the customer should be duly registered in the system before delivery to the customer
• Corporate customers should be advised and encouraged to pre-advice their cheques, and use e-banking for payment of their transactions.
• Customers should be educated to conduct periodic checks on the sequence of cheque’s serial numbers.
• Use google maps and GPS codes to confirm residences and workplaces
• Customers should also be advised to keep their cheque books secure to prevent it from getting into wrong hands and immediately report to the bank if they are missing.
• Remaining cheque books of closed accounts should be destroyed
• Cheque books printed and received at a branch should be kept under lock and key and the required due diligence enforced in the final delivery process.
• Staff handling cheques for clearing should be properly trained
• Avoid the use of temporary and untrained staff in the account opening process.
• Customer service staff should educate customers on the usage of their cheque book during the delivery process and advise them on how their cheque books are serialized.
• Scrutinize cheque books received from the printers to ensure there are no added cheque leaflets due to mistakes.
• Develop a good confirmation process to be arranged for corporate customers

Bank Robbery

In our part of the world, where cash is still king, we still witness crimes involving armed robbery on persons carrying loads of cash either from the bank or on their way to the bank. Let us look at a common trend:

The customer leaves a bank. He or she is followed and robbed. The victims are often employers of large labour workforces, for example factories. These people, instead of paying their workers through the banks, withdraw large amounts of cash on certain known days, to pay their casual labourers the following day.

A quote from a paper read at a conference in March 2013 by Rabelani Dagada of the University of Johannesburg on the topic: DIGITAL BANKING SECURITY, RISK AND CREDIBILITY CONCERNS IN SOUTH AFRICA, he states: “The linchpin of the gang is the ‘spotter’.

Spotters blend in, wait in bank queues and look for a target. Sometimes, they don’t even need to see the money; they hear it. They will listen for the noise of the cash machine counting out money. To make themselves appear legitimate, spotters will deposit small amounts of cash or ask a teller for change. Using a cellphone, the spotter will then quickly pass on information.

They will describe what their target is wearing and sometimes even inform the ‘shooters’ outside in which pocket the money is being held. Outside, the shooters will pick up the target and begin following on foot or by car. The actual hit is quick and sometimes the gang is violent. Bank customers are not just followed. Sometimes the robbers strike as they head to the bank to deposit money”.

I shudder as I recall how Ghanaians witnessed two massive armed robbery attacks in 2019. One involved an Employer in Tema, the industrial city of Accra, Ghana, who was robbed on his way to the factory after withdrawing a huge volume of cash from the bank, to pay his workers. He was murdered in cold blood, for something which could have been avoided.

Similarly, another well- organized gang also stormed a motor-cycle shop in the Industrial area of Accra, seized cash from workers, looted cash in the safe meant for pickup from a bank, and even carried away the CCTV monitor! Sad indeed. Minor ones continue to happen regularly, with some not even reported in the media.

Initiatives by the Bank of of Ghana to address fraud in the banking sector

According to the report, the BOG continues to bolster engagements with institutions, particularly cited for high incidences of fraud, and strongly demand action plans to tackle and address such incidences of fraud. The Bank also directs its regulated institutions to report fraud incidences to the investigative authorities for the appropriate course of action to be taken.

The BOG in 2023 continued its engagement with relevant stakeholders including the National Cyber Security Authority, the National Communication Authority, the National Security Secretariat, the Economic and Organized Crime Office and the Ghana Police Service to enhance collaboration in the fight against fraud, especially cyber related fraud.

Bank of Ghana’s Directives to  Banks and Deposit taking institutions

The following Directives has been given to Banks and SDIs :

• update their technologies and tools with enhanced built-in security features to curb fraud.
• prioritize employee training and continued due diligence and strengthening of internal controls.
• strengthen the security protocols for account access and transactions, including multi-factor authentication as well as regular update of mobile banking applications with biometric authentication.
• ensure that mobile applications that allow auto logins are deactivated and secure codes should be required each time the user opens the application.
• ensure that Know-Your-Customer procedures during onboarding are strictly adhered to safeguard transaction verification processes.
• Banks and SDIs should intensify fraud sensitization to their customers.
• Banks and SDIs should collaborate effectively with law enforcement agencies in the event of staff fraud to ensure stiffer punishments are meted out to those found culpable to serve as deterrent.

Final remarks

We are getting close to the festive season which is usually preceded by brisk trading and commerce with payment of funds through the traditional as well as digital banking systems. Let us take all the precautions both internally and externally to cut down all forms of frauds which results in losses in the banking sector.

A stitch in time saves nine.

ABOUT THE AUTHOR

Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of Three books: “The 21^st Century Bank Teller: A Strategic Partner” and “My Front Desk Experience: A Young Banker’s Story” and “The Modern Branch Manager’s Companion”. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud.

CONTACT

Website www.alkanbiz.com

Email:alberta@alkanbiz.com  or [email protected]

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