EAST AFRICAN BANKS LOSE KSH4 BILLION TO FRAUDSTERS
Posted on
Aug 1, 2012
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East African banks lost kSh4.05 billion ($48.3 million) to fraud in the 18 months ended June this year, mainly through insider collusion.
The amount is equivalent to a full year profit for small or medium-sized banks in Kenya.
“This figure is significantly understated because actual fraud statistics are difficult to determine owing to numerous unreported cases,” said Robert Nyamu, a forensic director at Deloitte.
Nyamu made the remarks yesterday while presenting an overview of a report prepared by Deloitte East Africa on
According to the report, crime statistics by the one of the East African countries police force indicates a 14 per cent increase in economic crimes from 2,662 reported cases in 2010 to 3,036 last year.
Out of all reported cases, it is electronic money transfer methods that pose the greatest risk to commercial banks in East Africa.
The Deloitte report notes that while electronic platforms were introduced by the banking industry to speed up clearance of paper cheques, these modes have become popular targets for techno-savvy fraud rings.
The insurance industry, a key pillar of the financial system, has also been a target for fraudsters due to the huge funds it is sitting on.
While banks acknowledge that fraud is a challenge, there is still lack of disclosure by various players on the extent to which they are affected.
“Many institutions prefer internal resolution of fraud cases than referral to the law enforcement agencies, mainly due to reputational risk,” said Nyamu.
Illicit funds
Major scandals in the banking industry in East Africa, over the last 18 months, include a case where a bank lost funds amounting to $32.1 million via illegal transfers.
There is also a case where another bank lost $13 million suspected to be illicit funds, and another lost $1.1 million through fraud.
According to the Deloitte report, one bank branch manager conspired with two directors of the institution to transfer $459,000 from the bank.
One bank lost $500,000 through insider collusion, illegal money transfers from client accounts and other fraudulent means.
On a global scale, it is estimated that the world economy loses five per cent or $2.9 trillion of its Gross Domestic Product to fraudsters.
