Fraud at banks on the rise
The Bank of Ghana (BoG) is alarmed at the rising spate of card fraud and defalcation in the banking sector that is threatening the integrity of the financial system. Fraud remains a major operational risk that confronts the banking industry and the authorities are battling to contain the over 282 per cent surge of fraud in the banking sector.
Statistics from the Market Conduct Office of the Financial Stability Department of the BoG puts the number of reported cases from January to November 2016 to over 282 per cent rise in bank fraud.
The Second Deputy Governor of the BoG, Dr Johnson Asiama, told the Graphic Business on the sidelines of the AB & David’s Crystal Ball Africa 2017 in Accra on February 15 that the central bank had directed banks in the country to scale up IT infrastructure to ward off any further risks.
“We have asked the banks to scale up their IT security infrastructures to ward off these risks,” he said.
“We also want them to regularly review and upgrade their existing IT infrastructure, install stronger firewalls and acquire an ISO certified systems to secure their operations,” he added.
Data trends
Data from the Financial Intelligence Centre (FIC) in 2015 show that fraudsters attempted to cash more than GH¢923,883.86 million from the banks using 26 cloned cheques. The incidence of cloned cheques increased by 62 per cent as of November 2016.
In 2015, eight cloned cheques with the face value of GH¢88,623.54 million were successfully withdrawn by fraudsters.
Out of the 26 cloned cheques presented to the banks to be cashed, 18 of the cheques with a face value of GH¢835,260.32 were detected and returned unpaid.
Some suspects, he said, had been grabbed, while others who attempted to dupe various banks were on the run.
Market watchers have said bank fraud is usually carried out by a syndicate, meaning the issuers “may have links within various cheque printing houses”, which gives the prototypes an authentic look.
Dr Asiama said technological advancement had contributed to the spread of cheque cloning fraud with all manner of printers, software and other technologies being used to make cheques that look so perfect that it would take experts a lot of laboratory analysis to detect forgery.
Building firewalls
In an attempt to bring sanity into the financial system, the BoG has abolished the use of magnetic strip-based ATM/POS cards in the banking sector due to the risk vulnerabilities inherent in that technology.
Consequently, the central bank has introduced a two-factor authentication technology based on CHIP and PIN in the banking sector, which is expected to mitigate the risks associated with the use of electronic cards.
The second deputy governor said the central bank was also collaborating with the National Banking College to organise appropriate programmes for the industry this year to complement measures to mitigate the operational risks of banks.
Analysts say the incidence of cloned cheques could stop foreign investors from investing in an economy, which is highly exposed to such fraud and this could have significant effects on job creation, thereby leading to massive unemployment.
Cheques are the most patronised non-cash forms of payment in Ghana, with about GH¢96.8 billion worth of it presented last year.
Credibility issues
Even though cheques suffered some credibility issues in the past because of various reasons, subsequent reforms and rules have accounted for its huge usage in the country presently.
The BoG stepped up its enforcement of the regulation on dud cheques, with stern warnings posted conspicuously at every bank branch. It was followed by a two-prong approach to addressing the problem.
First is the application of fines and strict applications of the sanctions and a significant reform, which has led to the introduction of the electronic clearance of cheques.
The second is the new automated cheque processing procedure truncates or stops the movement of physical cheques at the deposit bank with only the image of the cheque transmitted through a secure electronic cheque clearing system to the paying bank.
A cheque, as stated in the Bill of Exchange Act 1961 (Act 55), is a bill of exchange drawn on a banker payable on demand. It is an instruction in writing from an account holder to their bank to pay a specified sum of money to a designated beneficiary.