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Bank fraud on the rise

Bank fraud by collusion is increasing in the country, threatening businesses most especially in the banking sector, John Ndunyu, the KPMG country director, has said.

“While cyber crime is not common in Rwanda, we are seeing increased tendency of fraud by collusion, especially in the banking industry,” Ndunyu said during the launch of firm’s 2013 fraud report in Kigali.

He advised banks to improve the welfare of employees as one of the ways to help reduce fraud in the sector. Ndunyu, however, said though fraud is still low in Rwanda, it could increase due to the rising rate of collusion. Collusion fraud, procurement fraud and asset misappropriation are most most common frauds committed, according the “Global Profiles of a Fraudster; White collar Crime–present and future” released on Tuesday in Kigali by KPMG, a global audit, tax and advisory services firm.

About 15 banks were surveyed in East Africa, including Rwanda. The survey indicted that the increasing cases of bank fraud could be a result of poor remunerations, greed and technological evolutions. It showed that though technology, including online and mobile banking, play a big role in combating fraud, fraudsters use it to fleece companies of millions of dollars.

Pauline Wanjohi, the chief executive officer UAP Insurance Rwanda, blamed the growing fraud cases on weak laws.

“The law criminalising fraud is not strong enough to deter people from engaging in the vice. People should not only be imprisoned for five to six years, but also made to refund the money they stole or have their properties confiscated,” she said.

The KPMG study analysed 596 fraudsters across the globe, faulted weak internal control systems, collusion at managerial level and lack of skills as the main drivers of fraud last year. According to the survey, executive directors committed the most fraud, amounting to 20 percent of the cases last year. About 15 percent of fraud cases were committed due to poor remunerations and 10 percent were committed out of anger, the report added.

Weak internal controls were responsible for 54 percent of the fraud cases, 51 percent of the frauds were committed by employees who had worked for the bank for a period of one to six years.

About 30 percent insurance claims were also lost in fraud, while only 7 per cent fraud cases were criminally procured globally. Willie Oelofse, the KPMG risk consulting director, urged banks and organisations to provide incentives to encourage whistle-blowers as a mechanism of detecting and minimising fraud.

“Conducting external and internal audits, as well as fraud audits is one of the cheapest ways to address the vice,” said Oelofse.

Generally, the report indicates that 70 percent of the fraudsters are between 36 and 55 years of age, 61 percent are by the victim firm’s employees, while 70 percent are committed through collusion. The National Bank of Rwanda recently established a committee to fight fraud. The committee will be meeting periodically with stakeholders to discuss ways of combating the crime that is threatening the financial sector, according to an official at National Bank of Rwanda.

Article Source: Newtimes

David Okwara

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