Bank fraud rises from GH¢115m to GH¢1bn – BoG

Ghana’s banking sector recorded a total of GH¢1 billion fraudulent transactions in 2020, the latest figures from the Bank of Ghana have indicated.

In the central bank’s executive summary of the report, it said in  2020,  many  routine  activities  of  institutions,  including  financial  transactions  that usually  would  have  been  undertaken  in-person were  conducted  online.

Customers who  were  not  used  to  digital/electronic  methods  of  making  financial transactions  were  compelled  to  use  them, BoG noted, adding: “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”. 

The central bank also said the emergence  of  the  COVID-19  pandemic  propelled  the  use  of  digital/electronic modes  of  transacting  business,  leading  to higher exposure  to  fraud.  

“The  year  2020  recorded  a  marginal  increase  in  reported  fraud  incidents  with  a minimal  decrease  in  losses”, BoG’s report noted.  “The  reduction  in  losses  was  mainly  due  to  a  reduction   in  the  rate  of  success  for  most  fraud types”. 

A  total  of  2,670  cases  were recorded  in  the  year  2020,  as  compared  to  2,311 cases in  2019, it said.

The  reported  value  of  fraud  for  2020  was  GH¢1.0  billion,  as  compared  to GH¢115.51 million  recorded  in  2019, the bank said  

The  notable  increase  in  the value  reported  was  as  a  result  of  high  values  recorded  in  attempted correspondent  banking  fraud  (forgery  of  SWIFT  advice), the report noted.

“Even  though  the  banking sector  did  not  suffer  any  losses  from  any  of  the  correspondent  banking  fraud attempts,  it  posed  a  reputational  risk  to  some  banks,  whose  staff  were  found culpable  in two  of  the three reported incidents”, the report said.  

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  24.0% decrease. 

It said the  “COVID-19  pandemic  resulted  in  a  surge  in  the  use  of  digital/electronic platforms  for  financial  transactions,  considerably” and in  an  effort  to  contain  the spread  of  the  virus,  “financial  institutions  encouraged  customers  to  take  full advantage  of  the  various  digital  products  and  services  available,  to execute financial transactions”. 

The central bank said the  “surge  in  usage  led  to  an  increase  in  the  incidence  of fraud-related  to  digital/electronic  products  and  services  and  consequently,  an increase  in  losses  emanating  from  products  such  as  E-Money and  ATM/Card fraud”.

It said submission  of  fraud  returns  for  2020 recorded  a  slight improvement. 

The  banks continued  to  maintain  a  100%  rate  of  submissions  and  the  rural  and  community banking  sector  recorded  a  remarkable  increase  of  75%  in  the  rate  of  submissions due  to  administrative  sanctions  issued  against  non-submitting  banks  in  the  first  half of the year. 

The  submission rate  across  the  SDIs, the central bank noted, “will improve  marginally  if  reporting  institutions  are  adjusted  to  exclude the distressed institutions”. 

The report said the  the year  2020  recorded  a 26.4%  decrease  in  the  success  rate  of fraud attempted.   

“Some  fraud  types  experienced  a  significant  increase  in  the  rate  of success,  as  compared  to  2019 while  others  recorded  a  remarkable  decrease  in their  rate  of  success,  in  comparison  with  2019”. 

Fraud  types  such  as  ATM/POS  fraud, impersonation  and  remittance  fraud  recorded  “significant  increases”  in  their  rate  of success  for the period under review, the report said.

ATM/POS-related  fraud  accounted  for  32.2%  of  total  fraud-related  losses  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”. 

The  COVID-19  pandemic, the bank noted, “forced  bank customers  to  use  alternative  channels  for  payments  and  bank  services”, pointing out, “poor personal  safety  perception  and  inadequate  customer  sensitisation  by  the banking institutions  may  be  the  cause  of  the  increase  in the  ATM/POS-fraud  type.”

Staff  involvement  in  the  commission  of  fraud  also  experienced  a “significant increase,  especially  suppression of  cash”, the report revealed. 

Also, it said, 56%  of  reported  fraud  cases  and  93%  of reported  cash  suppression  cases  involved  staff  of  the  reporting  institutions. 

Data  recorded  over  the  years  shows  a  persistent  trend  of  staff  involvement  in fraud, the bank noted.

It said despite  the  “numerous”  notices  of  caution  sounded  out  to  the banking industry,  “in  almost  every  fraud  report  issued  since  2017,  the  phenomenon continues  to  increase”. 

“The  steady  rise  in  this  phenomenon  generally  could  be attributed  to  the  use  of  poorly  remunerated  temporary  staff,  who  undergo  limited background  checks,  for  sensitive  tasks  and  a  lack  of  corporate  governance systems  that  helps  to  ensure accountability  and  fairness and transparency”, the report added.  

It said E-Money  fraud  is  beginning  to  show  a  “steady  rise”  in  the  count  of reported incidents. 

E-Money-related  losses  accounted  for  4.1%  of  the  total  fraud-related  losses incurred  in  2020,  as  compared  to  a  rate  of  1.1%  recorded  in  2019. 

The  proportion of  E-Money-related  fraud  incidents  reported  rose  from  0.6%  in  2019  to  4.7%  in  2020.

The key  recommendations  to  help  fight  current  fraud  trends  include  consumer education  on  the  safe  usage  of  digital/electronic  products,  the  improvement  of KYC  information  gathered  by  mobile  money  operators  (MMOs),  and  the acquisition  of  transaction  monitoring  systems  by  MMOs  to  help  monitor suspicious transaction.

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