Banks soft targets as accounts wizards exploit weak checks

Fraudsters are quietly robbing banks and other financial institutions of a billion shillings annually, a survey on financial crimes has revealed.

A report by Deloitte Kenya shows that most of the millions are lost through cash theft, cheque fraud and the misappropriation of assets.

Naturally, banks are the biggest victims, with insurance companies coming a close second. The two are favourite targets with fraudsters because they handle and keep piles of money that strain their internal controls.

Corporate bank accounts are especially vulnerable because they frequently move a lot of money, making the tracking of any suspicious transactions more difficult compared to monitoring personal accounts.

Robert Nyamu, the director of Forensic and Litigation Support at Deloitte, says the amounts being siphoned from unsuspecting corporations could be more than Sh1 billion because most banks and financial institutions are reluctant to disclose such thefts.

SIPHON MONEY

“There are lots of reputation issues tied to disclosing whether or not your institution has fallen prey to fraudsters. Many banks understandably don’t want to create fear in the customers. But the fraud is there,” he told the Nation.

Most of the fraud, he adds, is carried out by junior employees and rarely the top or mid-level management.

“Most banks in Kenya have poor internal controls to monitor the activities of their own employees. So, when an employee begins checking some accounts that they have no business accessing, no one questions them because no one even notices,” he adds.

According to Mr Nyamu, the most likely people to siphon money from bank accounts are the employees with an IT or accounting background.

Many companies have weak security controls and some do not have a platform for sharing information concerning incidents, trends and the extent of financial crimes, which makes it possible for crooks to go undetected in a given industry, he adds.

“We are aware of cases where a person who was fired from one bank after he was suspected of fraud, was hired in another simply because the rival bank did not want to disclose its vulnerability,” recalls Mr Nyamu.

Insurance companies and telecommunication companies have also been the most targeted although they have recently invested in securing their systems.

“Mobile money services were the hottest target in the past few years but this is no longer the case as systems have been upgraded and loopholes sealed,” he says.

Collusion between outsiders and insiders in the targeted financial institutions was the most preferred way of theft, the report showed.

Mr Nyamu explains that it is virtually impossible for someone to defraud a financial institution from outside, which is why internal whistle blowers are a must whenever a colleague exhibits suspicious behaviour.

“Many of these culprits are insiders, or they had someone on the inside working with them,” he says.

Mr Nyamu advises investors and savers to educate themselves on the various ways of checking whether a company is compromised or not.

“First, you should check whether the industry you are ploughing your money into is regulated. A lot of people lost money a few years ago in pyramid schemes that were not regulated by the government. Today, people continue to lose money from loan sharks,” says Mr Nyamu.

Clients should also regularly monitor the financial health of the institutions they are dealing with by monitoring financial trends and attending shareholders meetings.

“Bank customers should insist on being alerted whenever there is any activity in their accounts,” he adds.