Expert lists financial system fraud causes

Stories from Ngozi Onyeakusi, Lagos.

Poor social value, inadequate laws or poor implementation of legal/regulatory provisions for fraud have been identified as factors responsible for increased cases of fraud in the nations financial system.

This was the submission of the Deputy Governor, Financial Systems Stability, Central Bank of Nigeria (CBN), Mr. Adebayo Adelabu, at the 2014 compliance conference held in Lagos.

According him, others factors include continuous cases of advancement in technology without commensurate emphasis on capacity building in banks and other companies; insatiable appetite for wealth among individuals and poor moral upbringing of children; and banks’ poor or faulty staff recruitment processes, poor conditions of service; and weak internal controls.

Adelabu noted that the 2013 Global Fraud Report indicated that Africa had the highest regional level of fraud losses, with about 2.4 per cent of revenue lost to fraud.

He pointed out that Africa had retained its position as the region with the largest fraud cases, while sub-Saharan Africa maintained the unenviable position of the region with the most prevalent fraud problems (77 per cent), among the regions surveyed.

He further stated that Africa has highest regional figures of physical assets theft which presently stood 47 per cent, corruption (30 per cent), regulatory or compliance breaches (22 per cent), internal financial frauds (27 per cent) and misappropriation of organizational funds (17 per cent). No wonder it also had the highest regional level of fraud losses (2.4 per cent of revenues).”

Adelabu, who left the banking sector a few months ago when he was appointed a deputy governor at the CBN along with the new Governor of the CBN, Mr. Godwin Emefiele, said the lenders had recorded more fraud cases because of internal collusion with bank officials.

“We have recorded high success rate of frauds from this class of individuals just with collusion of bank officials. In fact, before I left banking, we had started seeing the incidences of more internal frauds than eternal; which means it is very difficult to curb,” he noted

He added, “It is those who know your systems and controls that compromise to assist external fraudsters. If banks can find a way to minimise the cooperation of their employees with these fraudsters, there is going to be a reduction in the number of successful fraud cases.”