Report on Frauds and Forgeries in Banks

Transcription

1 Report on Frauds and Forgeries in Banks January - March, 25

2 Report on Frauds and Forgeries in the Nigerian Banking Industry for the period January - March, 25 Overview During the first quarter of 25, FITC received 7 returns from 24 deposit money banks on incidence of frauds and forgeries that occurred in their various institutions during the period. 23 of the returns were received for the month of January, and 24 returns were received each for the month of February and March, 25. Volume and Value of Fraud Cases Analysis of the returns shows that a total of 3,657 cases 2 of frauds and forgeries were reported in the banking industry during the first quarter of 25, compared to 4,79 cases reported in the fourth quarter of 24. By this figure, there was a decrease of 2.49 per cent in the reported cases of fraud in the banking industry. The types of fraud that were reported to be predominant during the review period include fraudulent ATM withdrawals, computer/web fraud, PoS fraud, miscellaneous (other types of) fraud, opening/operating fraudulent accounts, fraudulent withdrawals, and suppression of entries. Appendices I and II contain details of the fraud incidence that occurred during the review period with graphical illustrations. During the quarter, the total amount 4 of money that was reported as being involved in fraud cases reduced to N3.6 billion from N4.57 billion in the previous quarter, indicating a significant 33.8 per cent decrease. Of the total amount (i.e. N3.6 billion) involved in fraud, N88.43 million (approximately 28.8 per cent) was actually lost to fraud in the banking industry. The difference of N2.8 billion (7.9 per cent) of the total amount involved in fraud was recovered through the collective efforts of banks internal control systems as well as external monitoring from relevant agencies of the government including intervention of the law enforcement and anti-graft agencies. Rating the fraud types according to their value, Appendix II (A) shows that fraudulent withdrawals ranked first at N76.6 million (23.2 per cent), and computer/web fraud ranked second at N million (8.92 per cent), while miscellaneous (other types of) fraud ranked third at N475.9 million (5.57 per cent), of the total amount involved in fraud and forgery during the review period. Appendix II (B) further provides a graphical illustration of the amount that was reported to be involved in fraud and forgery cases during the review period. Further analysis of the returns shows that miscellaneous (other types of) fraud accounted for N4.3 million (46.58 per cent) of the total amount that was actually lost to fraud during the quarter, while mobile banking fraud accounted for N244. million (27.7 per cent), and computer/web fraud accounted for N.7 million (.55 per cent). Appendix II (C) shows the amount that was 2

3 actually lost to fraud and forgery activities in the first quarter of 25, while Appendix II (D) shows graphical comparison of the amount involved in fraud and the actual amount that was lost to fraud during the period. The Channels, Instruments and Personalities involved in perpetrating Fraud During the review period, various types of channels were used to perpetrate fraud: these included the Web, ATM, bank branch, PoS and agent. Meanwhile, the instruments used by fraudsters to carry out fraud during the period were cash, cheque, cards and slips. Analysing the banks returns by the amount involved, the channel that was mostly used to perpetrate fraud was bank branch, which increased by 6.89 per cent to N.97 billion from N.69 billion recorded in the preceding quarter. However, it is heartening to note that incidences of fraud through the ATM decreased significantly by 87.3 per cent to N58.28 million from N.25 billion in the previous quarter. There was also a significant decrease in the fraud perpetrated through the Web by per cent dropping to N million from N.54 billion, that was recorded in the preceding quarter. Analysis by the amount involved in fraud through the use of various instruments reveals that cards were mostly used to perpetrate fraud during the review quarter, which decreased considerably by 63.2 per cent to N.3 billion from N2.8 billion that was reported in the preceding quarter. Similarly, fraud through the use of cash plummeted by 43.4 per cent to N96.3 million from N.69 billion in the previous period. Details of the channels and instruments that were used in perpetrating fraud are graphically illustrated in Appendices III IV. The banks returns also reported information about banks employees whose appointments were either terminated or dismissed as a result of fraud related offences. The returns revealed that 9 employees appointments were terminated for fraud-related offences, which indicates a 25 per cent increase from the 4 employees whose appointments were terminated in the preceding quarter. The upsurge in the number of bank employees whose appointments were terminated on fraud related offences further indicate banks zero tolerance of fraudulent offences among their employees. However, it also indicates a need for banks to investigate causal factors for this observation, as the actual reasons may require interventions to ensure employees satisfaction and loyalty, as well as effective background checks during recruitment. Conclusion and Recommendations The parameters used to assess fraud and forgery occurrences in the banking industry within the first quarter revealed an improved performance, as many of the fraud incidence parameters decreased within the quarter. For instance, the total amount that was involved in fraud cases decreased significantly to N3.6 billion from N4.57 billion that was reported in the fourth quarter of 24, thus 3

4 indicating a decrease of 33.8 per cent. In a similar vein, the total amount that was reported to be lost to fraud and the total number of reported fraud cases in the banking industry both declined considerably to N88.43 million (from N.6 billion) and 3,657 (from 4,79), thus representing per cent and 2.49 per cent decrease respectively. It is, therefore, cheering to observe declines in the total amount that was reported to be involved in fraud, the actual amount that was lost to fraud, and the number of cases involved in fraud in the first quarter of 25. Likewise, it is very heartening to observe that the amount that was reported as being involved in electronic fraud 5 and the actual amount that was actually lost to electronic fraud decreased to N.3 billion from N2.8 billion and N million from N.25 billion in the previous quarter, thus representing 63.2 per cent and 7.5 per cent decrease respectively. In order to continually prevent fraud and sustain the achievement recorded in the first quarter, the collective effort of all stakeholders in the banking industry must be brought to bear, with focus on addressing areas where lapses might seem to be occurring. This is paramount as economic activities are expected to pick up in subsequent quarters of the year. The recent directive to banks on establishment of Fraud desks is worthy of note and the impact as well as modus operandi vis-à-vis cost of governance, will be of interest in the unfolding scenarios, in terms of impact on the system. (Please see the appendices below for summaries of the cases of frauds and forgeries covered in this report, with comparisons between the first quarter of 24, fourth quarter of 24 and the first quarter of 25, on selected concerns.) Notes: Note : Commercial, merchant and non-interest banks. Note 2 : Volume of fraud and forgery. Note 3 : Miscellaneous fraud includes such fraud as unauthorised debit, fraudulent diversions of customers fund for personal use, fraudulent debit of customers accounts, fraudulent debit of inter-branch suspense accounts, conversion of dividend warrants, dry postings, and misappropriation of funds. Note 4 : Value of fraud and forgery. Note 5 : Consisting of computer/web fraud, PoS fraud, mobile banking fraud, and ATM fraud. 4

5 Amount Involved Amount Lost Amount (N) Appendix I (A) Frauds and Forgeries in the Nigerian Banking Industry: A Comparison between Fourth Quarter, 24 and First Quarter, 25 S/N Variables Fourth Quarter, 24 First Quarter, 25 Total Cases reported 4,79 3,657 2 Total Amount Involved N4,573,855,855.5 N3,56,242, Total Amount Lost N,64,827,48.55 N88,428, Outsider Involvement 4,59 2, Insider (Staff) Involvement 5 25 Appointments Terminated 4 9 Appendix I (B) Frauds and Forgeries in the Nigerian Banking Industry: A Comparison between Fourth Quarter, 24 and First Quarter, 25 5,,,. 4,5,,. 4,,,. 3,5,,. 3,,,. 2,5,,. 2,,,.,5,,.,,,. 5,,. - Fourth Quarter, 24 First Quarter, 25 Quarters 5

6 Amount Involved Amount Lost Amount (N) Appendix I (C) Frauds and Forgeries in the Nigerian Banking Industry: A Comparison between Fourth Quarter, 24 and First Quarter, 25 5,,,. 4,5,,. 4,,,. 3,5,,. 3,,,. 2,5,,. 2,,,.,5,,.,,,. 5,,. - Fourth Quarter, 24 First Quarter, 25 Quarters Appendix I (D) Frauds and Forgeries in the Nigerian Banking Industry: A Comparison between First Quarter, 24 and First Quarter, 25 S/N Variables First Quarter, 24 First Quarter, 25 Total Cases Involved 2,957 3,657 2 Total Amount Involved N3,5,755,48.4 N3,56,242, Total Amount Lost N,276,529,762. N88,428, Outsider Involvement 2,8 2, Insider (Staff) Involvement Appointments Terminated

7 Amount Involved Amount Lost Amount (N) Total Cases Involved Outsider Involvement Insider (staff) Involvement Appointments Terminated Cases of Fraud Appendix I (E) 4, Frauds and Forgeries in the Nigerian Banking Industry: A Comparison between First Quarter, 24 and First Quarter, 25 3,5 3, 2,5 2,,5, 5 - First Quarter, 24 First Quarter, 25 Quarters Appendix I (F) Frauds and Forgeries in the Nigerian Banking Industry: A Comparison between First Quarter, 24 and First Quarter, 25 3,5,,. 3,,,. 2,5,,. 2,,,.,5,,.,,,. 5,,. - First Quarter, 24 First Quarter, 25 Quarters 7

8 Appendix II (A): Frauds and Forgeries in the Nigerian Banking Industry (First Quarter, 25) Types of Fraud Total Number of Cases Reported Involving Bank Staff Only Involving Outside Persons Only Collusion Not Specified Amount Involved (N) Actual /Expected Loss (N) Expected Loss/ Amount Involved (% ) Tellering Fraud 5 (.4) 5 (4.) () () () 4,327,46. (.4) 3,69,46. (.42) 85.3 Falsification of Accounts: Current/Cheque, Savings/Deposits, Suspense Accounts (.3) () (.4) () (),54,5. (.3) () Forged Cheques with Forged Signature 32 (.88) 3 (2.4) 25 (.89) 2 (66.67) 2 (.28) 37,743,2. (2.3) 3,559,. (.4). Printing of Bank Document Illegally (.3) (.8) () () () () () Clearing Fraud (.27) () 9 (.32) () (.4) 44,69,88.8 (.46) 995,. (.) 2.2 Computer/Web Fraud 53 (4.52) 5 (4.) 47 (4.43) () 9 (6.78) 578,34,25.22 (8.92),74,78.49 (.55) 7.6 Mobile Fraud 7 (.9) (.8) 5 (.8) () (.4) 287,52,784. (9.4) 244,,. (27.7) Foreign Exchange Fraud 4 (.) (.8) 3 (.) () () 6,672,5. (.22),. (.).5 Cross Firing of Cheques and Kite Flying () () () () () () () Note: All figures in parenthesis ( ) indicate percentages 8

9 Appendix II (A) Cont d: Frauds and Forgeries in the Nigerian Banking Industry (First Quarter, 25) Types of Fraud Total Number Of Cases Reported Involving Bank Staff Only Involving Outside Persons Only Collusion Not Specified Amount Involved (N) Actual /Expected Loss (N) Expected Loss/ Amount Involved (% ) Theft of Cash (.27) 6 (4.8) 2 (.7) (33.33) (.4) 4,39,. (.4),252,5. (.4) 28.5 Suppression of Entries: Cash/Cheques Opening and Operating Fraudulent Loans and Accounts Over-Invoicing of Service to the Bank 52 (.42) 67 (.83) (.3) Robberies (Armed) 4 (.) Fictitious Bank Branches Miscellaneous and Other Types of Fraud Fraudulent Withdrawals Fraudulent ATM Withdrawals () 8 (2.9) 62 (.7) 2,688 (73.5) PoS Fraud 2 (2.79) 52 (4.6) 3 (2.4) (.8) () () 25 (2.) 7 (3.6) 4 (3.2) (.8) () 64 (2.27) (.2) 4 (.4) () 53 (.88) 44 (.56) 2,5 (75.) 88 (3.2) () () () () () () () () () () () () () () 2 (.28) (.4) 569 (8.25) 3 (.83) 3,755,34.9 (.) 223,562, (7.3),725. () 53,72,63.34 (5.3) () 475,93,7.26 (5.57) 76,69, (23.2) 58,277, (5.8) 9,668,27.5 (.32) 6,758,628. (.77) 22. 7,848,8. (.89) 3.5 () 47,389,6.34 (5.38) () 4,25,32.79 (46.58) 3,93,2. (3.43) 8,43,462. (2.9) 4,379,45.9 (.5) Total 3, , ,56,242, ,428, Note: All figures in parenthesis ( ) indicate percentages

10 Tellering fraud Falsification of Account: Forged cheques with forged printing of bank document Clearing Fraud Computer/Web Fraud Telex fraud Foreign Exchange Fraud Cross Firing of cheques & Kite flying Theft of cash Suppression of Entries: Opening and Operating Over-invoincing of service to the Robberies (Armed) fictitious bank branches Miscellaneous and other Types of Fraudulent Withdrawals ATM Withdrawals PoS Fraud Percentages Tellering fraud Falsification of Account: Forged cheques with forged printing of bank document Clearing Fraud Computer/Web Fraud Telex fraud Foreign Exchange Fraud Cross Firing of cheques & Kite flying Theft of cash Suppression of Entries: Opening and Operating Fraudulent Over-invoincing of service to the Robberies (Armed) fictitious bank branches Miscellaneous and other Types of Fraudulent Withdrawals ATM Withdrawals PoS Fraud Percentages Appendix II (B) Percentage Distribution of Amount Involved in Frauds and Forgeries (First Quarter, 25) Amount Involved Types of Fraud Appendix II (C) Percentage Distribution of Amount Lost to Frauds and Forgeries (First Quarter, 25) Amount Lost Types of Fraud

11 Tellering fraud Falsification of Account: Forged cheques with forged signature printing of bank document Clearing Fraud Computer/Web Fraud Telex fraud Foreign Exchange Fraud Cross Firing of cheques & Kite flying Theft of cash Suppression of Entries: Cash/Cheques Opening and Operating Fraudulent Over-invoincing of service to the Bank Robberies (Armed) fictitious bank branches Miscellaneous and other Types of Fraudulent Withdrawals ATM Withdrawals PoS Fraud Percentages Appendix II (D) Percentage Distribution of Amount Involved in and the Amount Lost to Frauds and Forgeries (First Quarter, 25) Amount Involved 35. Amount Lost Types of Fraud Appendix III (A) Fraud and Forgeries through various Payment Channels: A Comparison between Fourth Quarter, 24 and First Quarter, 25 S/N Channels Cases: Fourth Quarter, 24 Cases: First Quarter, 25 Web ATM 3,36 2,688 3 Bank Branch Mobile 7 5 POS Van 7 Agent 4 Total 4,79 3,657

12 Web ATM Bank Branch Mobile PoS Van Agent Amount (N) Appendix III (B) Amount Involved and Amount Lost to Fraud through various Payment Channels: A Comparison (Fourth Quarter, 24 and First Quarter, 25) S/N Channel Amount Involved, Fourth Quarter, 24 (N) Amount Involved, First Quarter, 25 (N) Amount Lost, Fourth Quarter, 24 (N) Amount Lost, First Quarter, 25 (N) Web,544,463, ,34, ,77,794.3,74, ATM,247,547, ,277, ,36, ,43, Bank Branch,686,349,478.8,97,7, ,566, ,87,7.3 4 Mobile. 287,52, ,,. 5 POS 7,6, ,668,27.5 4,363, ,379, Van Agent 78,388, ,282,38.8 9,872,8.7,96,. Total 4,573,855, ,56,242,68.32,64,827, ,428, Appendix III (C) Amount Involved and Amount Lost to Fraud through various Payment Channels: A Comparison (Fourth Quarter, 24 and First Quarter, 25) 2,5,,. 2,,,. Amount involved in the Fourth Quarter, 24 Amount involved in the First Quarter, 25,5,,.,,,. Amount lost in the Fourth Quarter, 24 Amount lost in the First Quarter, 25 5,,. - Channels 2

13 Appendix IV (A) Frauds and Forgeries through various Instruments: A Comparison between Fourth Quarter, 24 and First Quarter, 25 S/N Instruments Cases: Fourth Quarter, 24 Cases: First Quarter, 25 Cash Cheques Cards 3,86 3,328 4 Slips 4 Total 4,79 3,657 Appendix IV (B) Amount Involved and Amount Lost to Fraud through various Instruments of Transaction: A Comparison (Fourth Quarter, 24 and First Quarter, 25) S/N Instruments Amount Involved, Fourth Quarter, 24 (N) Amount Involved, First Quarter, 25 (N) Amount Lost, Fourth Quarter, 24 (N) Amount Lost, First Quarter, 25 (N) Cash,685,882, ,296, ,765, ,946, Cheques 65,48, ,993,96. 4,23, ,554,. 3 Cards 2,89,7,42.35,33,789,69.9,249,388, ,55, Slips 3,77, ,62,35. 6,549, ,42,35. Total 4,573,855, ,56,242,68.32,64,827, ,428,

14 Cash Cheques Cards Slips Amount (N) Appendix IV (C) Amount Involved and Amount Lost to Fraud through various Instruments of Transaction: A Comparison (Fourth Quarter, 24 and First Quarter, 25) 3,,,. 2,5,,. 2,,,.,5,,.,,,. 5,,.. Amount involved in the Fourth Quarter, 24 Amount involved in the First Quarter, 25 Amount lost in the Fourth Quarter, 24 Amount lost in the First Quarter, 25 Instruments 4