Cases of fraud, forgery on the increase in banks – NDIC

THE Nigeria Deposit Insurance Corporation (NDIC)  has revealed increased incidence of fraud and forgery in the banking industry in the 2011 financial year. In the 2011 Annual Reports and Statements of Accounts released on Wednesday in Abuja, a total of 2,352 fraud cases involving the sum of N28.40billion were recorded by banks .
With the expected  contingent loss of about N4.071 billion, the NDIC said the volume of fraud and forgery cases represented an increase of about 53.5 per cent over the 1, 532 reported cases in 2010.

Although the amount involved in the  frauds and forgeries increased by 33.40 per cent from N21.29billion in 2010 to N28.40billion in 2011, the NDIC said the expected loss decreased by 65 per cent from N11.68 billion in 2010 to N4.07 billion in 2011. According to the report, the increase by 53.5 per cent of attempted or successful fraud and forgery cases as reported in 2011 over the preceding year, could be attributed to rising fraud cases through internet banking and suppression of customer deposits.

The NDIC said the top 10 banks with the largest number of reported cases of fraud and forgery accounted for 87.1 per cent of the banking industry fraud cases in 2011 compared to 51.08 per cent in 2010. Further analysis of the types and nature of frauds and forgeries committed during the year under review revealed that ATM frauds and fraudulent transfers/withdrawals accounted for the largest number of perpetrations(738) as had been the case in the preceding year.

Other fraudulent activities during the period under review were Fraudulent transfers and withdrawal of deposits (331), presentation of forged cheques (280 cases), Outright theft (240 cases), suppression of customer deposit (219cases), fraudulent conversion of cheques (123cases), Non dispensing of money but registered by the electronic journal (112 cases) and internet fraud (108cases). Of the 2,352 fraud cases reported , 498 were attributed to staff/staff participation which showed an increase of 141 from 357 cases reported in 2011. Despite the increase, the report showed that the losses resulted there from declined by 62.3 percent from N6.43billion in 2010 to N2.42billion in 2011.

The reduction, the report indicated was as a result of better and improved security and internal control measures put in place by the banks for transactions involving large sum of money. According to the report, the highest number of staff involved in cases of frauds and forgeries during the year under review was from the clerks and cashier status as had been the case in the preceding years with the lowest from the typists , technicians and the stenographers.

Analysing the causes of frauds and forgeries in the banks, the report indicated institutional factor such as poor accounting and weak internal control system, poor management, inexperienced staff and ineffective supervision of subordinates and environmental factors, which include societal demands, low moral values, slow and tortures legal process, lack of effective deterrent and punishment and at times, reluctance on the part of the individual banks to report fraud cases due to negative publicity it could attract to their image as as the causative factors.

In view of the extent of frauds and forgeries in the year under review, the NDIC said it was imperative that all insured banks employ measures to strengthen their operational risk management frameworks in the area of internal control and security systems to combat to combat the incidence of frauds and forgeries.




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