Employee fraud in banks rises - Accounts for more than half of fraud cases in 2020

BY: Emmanuel Bruce
Dr Ernest Addison — Governor, Bank of Ghana
Dr Ernest Addison — Governor, Bank of Ghana

More than half (56 per cent) of the 2,670 fraud cases reported by banks and specialised deposit institutions in 2020 involved staff of the reporting institutions, the 2020 Banks & SDI’s Fraud report by the Bank of Ghana has indicated.

Data recorded over the years shows a persistent trend of staff involvement in fraud cases, with the 2019 report also indicating that 51 per cent of the reported cases involved staff.

Despite the numerous notices of caution sounded out to the banking industry, in almost every fraud report issued since 2017, the phenomenon continues to increase.

The BoG, in the report, noted that the steady rise of this phenomenon generally could be attributed to the use of poorly remunerated temporary staff, who undergo limited background checks, for sensitive tasks and a lack of corporate governance systems that helped to ensure accountability and fairness and transparency.

Of the fraud cases reported, suppression of deposits accounted for 73.3 per cent. This was the area which recorded the highest rate of staff involvement, with 78.6 per cent of all cash suppression cases reported indicating the involvement of staff.

New code of ethics

It is against this backdrop of rising fraud cases involving bank staff that the Chartered Institute of Bankers Ghana, has, in collaboration with the Bank of Ghana and the Ghana Association of Bankers, this year, introduced the new Banking Code of Ethics and Business Conduct to help rebuild the image of the banking profession.

The new code of ethics is expected to guide the conduct of bankers and banking sector employees in the country.

Among other things, the new code will make it possible for practitioners that deviate from the industry's ethics and standards to be blacklisted from practising for a specified period.

The President of the Chartered Institute of Bankers (CIB) Ghana, Reverend Mrs Patricia Sappor, in an earlier interview with the Graphic Business, said the new ethics would police the profession and guard against waywardness.

It is, therefore, expected that this new code of ethics would help raise the standards, instill professionalism, and reduce the increasing rate of bank’s staff involvement in fraud cases in subsequent years.

Fraud cases hit GH¢1 billion

The report noted that the reported value of fraud for 2020 was GH¢1.0 billion, as compared to GH¢115.51million recorded in 2019.).

The notable increase in the value reported was as a result of high values recorded in attempted correspondent banking fraud (forgery of SWIFT advice).

Even though the banking sector did not suffer any losses from any of the correspondent banking fraud attempts, the BoG pointed out that this posed a reputational risk to some banks, whose staff were found culpable in two of the three reported incidents.

The BoG also attributed the surge in fraud cases to the COVID-19 pandemic which resulted in a spike in the use of digital/electronic platforms for financial transactions.

In an effort to contain the spread of the virus, financial institutions encouraged customers to take full advantage of the various digital products and services available, to execute financial transactions.

The BoG said the surge in usage, therefore, led to an increase in the incidence of fraud related to digital/electronic products and services and consequently, an increase in losses emanating from products such as E-Money and ATM/Card fraud.

E-Money related loss accounted for 4.1 per cent of the total fraud related loss incurred in 2020, as compared to a rate of 1.1 per cent recorded in 2019.

The proportion of E-Money-related fraud incidents reported also rose from 0.6 per cent in 2019 to 4.7 per cent in 2020.

Despite the increasing rate of fraud cases, which was valued at GH¢ 1 billion, the losses incurred by the banks stood at GH¢25.40 million, as compared to an estimated loss of GH¢33.44 million in 2019, representing a 24.0 per cent decrease.