The annual publication of the Bank of Ghana Fraud Report brings out sad reminders. Any time I read this report, my heartbeat misses a bit. Of course, it is usually followed by trolling of staff in these institutions for the next one month and more across all communication networks.
Background
The publication seeks to create awareness of fraud occurrences and trends identified within the reporting year with the view to promote the soundness and integrity of the banking system.
The 2023 report presents fraud typologies observed in relation to services provided by Banks, Specialized Deposit-Taking Institutions (SDIs) and Payment Service Providers (PSPs). The report finally emphasizes measures the BOG is taking to ensure that the identified fraud trends are mitigated.
Before I continue, I wish to emphasize on the coverage of the report. We have various institutions that perform the business of banking. The Banks and Specialised Deposit-Taking Institutions Act, 2016, officially known as Act 930, is a significant legislative framework in Ghana that regulates the operations of banks and specialised deposit-taking institutions (SDIs).
SDIs are licensed by Bank of Ghana to take deposits as they perform financial intermediation. These include finance houses, remittance companies, savings and loans companies and leasing companies.
What is the difference between deposit taking and non deposit-taking institutions?
As their name implies, depository institutions accept deposits from businesses and individuals and provide traditional banking services. Non-depository institutions, on the other hand, do not accept deposits but offer other financial services, such as insurance, mutual funds, pension funds, and brokerage firms.
The PSPs
The Report also covers PSPs, or payment service providers. Also known as third-party payment processors, PSPs allow businesses to accept credit and debit cards, plus other payment types for online, mobile, in-store and recurring payments.
Bitter lessons unlearnt
The 2017/18 banking crises that led to the revocation of many local bank licenses by BOG is only six or seven years ago. Coupled with the reeling of emotions following clients locked -up funds, the famous ‘hair cuts’ to clients investments with government bonds, etc, the annual fraud report adds to the mistrust recently associated to banking transactions by the general public.
Every year I share my opinions and make some recommendations on the way forward. As the Chartered Institute of Bankers’ Ghana continues to forge more ethical values among bankers, Chartered bankers are now referred to as Trusted Professionals. Yes, the description is very apt.
The currency of our profession is trust. When the public seizes to trust bankers, then we no longer remain relevant. As an advocate of risk prevention in all spheres of banking, I sometimes wonder whether people are actually reading and learning from history. I will continue to play my part in sharing some tips on how we can be more intentional in preventing some of the losses incurred as a result of fraud.
It is almost eleven years since this weekly column (Risk Watch) came into existence with the sole aim of sharing risk management insights with young bankers and other professionals. I therefore never get tired of writing or talking about risk, errors, frauds and losses. I will use the next few weeks to highlight certain things we can all do to minimize this canker of fraud.
Internal Fraud: the “Taboo Subject”
Let me start with the fundamentals of risk mitigation
The Fraud Report showed that the number of staff involved in fraudulent activities in banks and Specialized Deposit-Taking Institutions (SDIs) rose from 188 in 2022 to 274 in 2023, representing an increase of 46 percent.
In addition, money lost through fraud cases increased by 7 percent to hit 88 million cedis in the same period under assessment. Many banks hate to talk about this, despite the fact that every bank has experienced it. Due to confidentiality issues, regulatory damage implications, it may seem as if this topic is swept under the carpet. However, it is still a high priority issue.
Recruitment and Induction
Human Resource departments of banks have policies that include hiring, training, compensating, and terminating staff members. All four activities serve as potential controls for preventing the misappropriation of assets.
Hiring:
As part of the recruitment process, it is good to include staff screening mechanisms, like personality tests and employee references, to ensure that they are hiring persons with great potential.
However, I believe that the ultimate should be the person’s character. Aside from these, background checks should not even be an option. It is a must have! In these days of social media, background checks should be more detailed with close monitoring of the person’s social media lifestyle.
Employees with a work history should be seriously investigated to know why they have left. Human Resource Managers in financial institutions have a close relationship of using both formal and informal means of enquiring about potential appointees.
Induction
We all know that the induction process is critical to welcoming new starters and getting them effective as quickly and painlessly as possible. Sometimes the dire need for extra hands makes the situation so precarious that some new staff are not even given any orientation.
They are just asked to report to duty at their destinations and bingo, they find themselves being placed behind a desk or counter to start work. For most beginners it is quite stressful. There have been many grounds for some people to complain, (both inductees and their line managers) that they were rushed through induction and released feeling almost as raw as they entered the bank on the first day.
From my banking experience, I have cause to believe that many losses or internal frauds perpetuated in financial institutions could have been reduced to the minimum by effective induction, training, coaching and mentorship schemes.
These can be quite costly at the beginning, but it is much more costly at the end when the financial institutions suffer huge losses which could have been avoided. Many bank staff who appear before Disciplinary Committees find themselves lost for words and sometimes even break down in tears for things they did out of ignorance of the implications of their actions, as well as the sanctions attached to the activity.
Every banker has in one way or another committed a mistake out of ignorance, but the important thing is whether there are lessons learnt and lessons shared among staff. Induction programs followed by coaching and mentorship makes employees get the best while also giving off their best.
Indoctrination of the bank’s culture
This is a critical aspect of induction programs. One would ask why we even bring new staff together for induction. Induction programs are so critical that organizers need to make them leave indelible marks in the memory of the inductees.
This is the ideal opportunity to promote the organization’s core values of honesty and integrity, and demonstrate the zero-tolerance policy. In addition, the reference to examples of fallen employees who succumbed to temptation and suffered the consequences for inadequate job performance can also be a preventive control, especially for employee fraudulent activity.
Putting the “Fear of God” in the Inductees
The need for risk awareness creation is very critical in induction programs. Having organized several induction programs for beginners, one of my memorable experiences was during the fraud awareness sessions. These sessions were usually handled by Managers of the Risk and Audit Departments as well as the Security Coordinator (who in most cases may be former law enforcement official).
The fact that the names, the types of fraudulent activities perpetuated and even sometimes pictures of “fallen employees or heros” of the banks are sometimes exposed to the inductees, not forgetting the consequences they suffered. These usually leave a clear message that staff members will be immediately terminated, lose their valuable source of income and benefits, and even prosecuted if they perpetrate fraud. The use of pictures of the “fallen” employees shows how anyone on the job can be very vulnerable and succumb to temptation. It also proves the fact that fraud is no respecter of age, gender, status, grade or position.
The inductees usual sober up when they are exposed to the hard truths and the mode of operations used by the internal fraudsters. They were taught to trust each other but still verify and ensure work done is according to the rules and regulations in the bank. In fact, such sessions on frauds reiterates the fact that the bank does not tolerate fraud of any type.
I will pause here and say that bankers must be able to train staff to prevent internal fraud right from the start. Let us remember that a stitch in time saves nine.
TO BE CONTINUED
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 21st 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]
Tel: +233-0244333051/+233-0244611343
