The ARB Apex Bank Limited, which serves as a “mini” central bank for Rural & Community Banks (RCBs) says the increase in different types of fraud in rural banks is a course for concern.

According to the Bank of Ghana’s Banks & SDI Fraud Report for the year 2020, Banks and rural community banks recorded the highest cash suppression related losses in 2020.

Rural community banks lost GH¢ 1.69 million through cash suppression, as against a total of GH¢ 539,000 by banks.
In an interview with Citi Business News, the Acting Managing Director of ARB Apex Bank, Alex Kwasi Awuah noted that key steps are being taken to reduce the incidence of fraud in rural and community banks.

“We currently have internal arrangements to help deal with fraud. In fact when you go to any rural bank they have structures in place to deal with fraud. They have internal auditors who periodically conduct audit exercise in these institutions, unearth some of these fraud issues and then draw the attention of their boards for the necessary steps to be taken.”

“We are fully aware that fraud cases have occurred in some of our banks and when they come to our attention we take action as ARB Apex Bank. We can assure you that going forward, our systems are robust enough such that when any fraud cases occur we are able to identify and deal with them,” he added.

Reported value of fraud against Banks & SDIs hits GH¢ 1 billion

The reported value of fraud recorded by Banks and Specialized Deposit-Taking Institutions in Ghana in 2020 was about GHC 1 billion.

This represents an increase of over 750 percent when compared to the reported value of fraud recorded in 2019, which stood at about GH¢115 million.

That’s according to the Bank of Ghana’s Banks & SDI Fraud Report for the year 2020.

The emergence of the COVID-19 pandemic according to the fraud report, saw customers who were not used to digital/electronic methods of making financial transactions being compelled to use them.

Consequently, some sections of the banking sector were exposed to heightened levels of fraud related risk, due to the increased patronage of electronic/digital products and services.

Number of fraud cases

In total, the year 2020 recorded a marginal increase in reported fraud incidents with a minimal decrease in losses. A total case count of 2,670 cases was recorded in the year 2020, as compared to 2,311cases in 2019, representing a year-on-year increase of about 15 percent.

Despite the reported value of fraud rising to GHC 1 billion Cedis, actual losses incurred as a result of fraud for 2020 stands at GH¢25.40 million, as compared to an estimated loss of GH¢33.44 million in 2019, representing a 24 % decrease.

In terms of the number of cases reported, fraudulent Withdrawals recorded the highest rate of increase in the year under review. Fraudulent Withdrawals increased from 16 cases in 2019 to 177 cases in 2020 representing an increment of 1,006.3%. E-Money Fraud also recorded 64 cases in 2020, as compared to 14 cases recorded in 2019, representing an increase of 357.1% in year-on-year terms. ATM/POS Fraud recorded 168 cases in 2020, as compared to 110 cases recorded in 2019, representing a 52.7% increase in year-on-year terms.

ATM/POS fraud tops list

Fraud types that saw significant increases in success rate in 2020 were ATM/POS fraud, impersonation and remittance fraud. ATM/POS related fraud accounted for 32.2% of total fraud-related loss incurred in 2020 and recorded the highest loss value of GH¢8.19 million in 2020, as compared to GH¢1.26 million recorded in 2019, representing a 548.1% increase in year-on-year terms.

E-money fraud also recorded a significant increase in loss value. Loss incurred through E-money fraud increased from approximately GH¢ 0.37 million in 2019 to an estimated GH¢ 1.04 million in 2020, representing a 180.0% percentage increase.

This upsurge may also be a result of an increase in use of E-Money services due to the COVID–19 pandemic. Burglary also recorded a considerable increase in reported and loss values for 2020 as compared to reported and loss values recorded in 2019.

Burglary recorded a reported value of approximately GH¢ 1.35 million in 2020, as compared to an approximate reported value of GH¢ 0.70 million in 2019, representing an increase of 97.7% in year-on-year terms.

Staff involvement

Staff involvement in the commission of fraud also experienced a significant increase, especially suppression of cash. 56% of reported fraud cases and 93% of reported cash suppression cases involved staff of the reporting institutions.

Recommendations

The Bank of Ghana went on to make a number of recommendations to help mitigate the incidence of fraud in the country. These include the adequate vetting of Contract/temporary staff of financial institutions by the Police and Bank of Ghana to help identify staff with questionable characters.

The banking industry should also take a critical look at remuneration of temporary staff according to the report.

In addition to adequate consumer education on cybersecurity for their customers banks have been asked to strengthen their Know You Customer & Customer Due Diligence as well transaction monitoring systems in order to facilitate the detection of suspicious or abnormal activities on customers’ accounts.