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Fighting Banking Fraud In Kenya Requires A Multi-Sectoral Approach

220,000 bank account holders who account for 3% of bank users in Kenya have reported losing their money from their accounts this year. Photo by Karolina Grabowska from Pexels

Caroline Atieno, a 58-year-old walked to her bank one July afternoon last year to withdraw money for her next clinic appointment and was met with shock – all the money she had was gone!

“There was only fifty-six shillings and twenty-eight cents left in my account. I had more than Sh. 240,000 in that account before. It was money my children living abroad sent me for monthly upkeep and my medical bills,” she says smiling. Perhaps amused by her gullibility.

Atieno is both diabetic and hypertensive. She is on life-long medication for both conditions which she says cost her about Sh. 30,000 every month. She regularly receives money from her two children living abroad to cater for her medical expenses and living costs. She kept the money in a bank, believing that it was the safest place her money could be.

She says she remembers one evening someone calling her claiming that they were from the bank and that they were doing maintenance to their mobile banking system.

“He was sounding very professional and spoke good English, did not seem like a con to me. I had my phone with me and was confident that there was no way someone else would withdraw my money while I had my phone in my own hands at home. The bank at times called, as such, nothing sounded off. They even called back to assure me that the issue was sorted,” she says still smiling.

About three days after the phone call, Atieno’s phone went dead. It could not detect her mobile service providers network. When she went to the customer care shop, she was told her phone had been reported lost and her sim card swapped. She thought it must have just been a small error. She produced her original identification documents and had her sim card replaced.

“I could not still relate the swapping of my sim card to the call about the mobile banking service earlier in the week. It was until the day of my clinic visit that I realized that I had been locked out of my mobile banking service. When I visited the bank, I realized the two incidents were related, and that’s how I lost the money. I reported the incident with the police as advised but there has been little progress so far,” she explains.

The Finaccess 2019 Household Survey jointly authored by the Central Bank of Kenya (CBK), the Kenya National Bureau of Statistics (KNBS) and British financial inclusion lobby group Financial Sector Deepening (FSD) Kenya says 220,000 bank account holders who account for 3% of bank users in Kenya have reported losing their money from their accounts this year.

In being proactive to the banking fraud challenges, Equity is attempting to  lead the way by introducing one phone number that the bank will be using going forward to make outgoing calls to customers that has been dubbed “ONE EQUITY NUMBER.”

“All Equity staff, whether it is your branch manager, relationship manager, account opening officer, credit or loan officer, insurance officer, agriculture officer, procurement manager, investment advisor, shares buying or selling etc, they will ALL call you using ONE NUMBER; 0763 000 000,” says a statement from the bank.

The absence of one easily identifiable number that financial institutions and mobile money providers use to communicate with their customers is a loophole that fraudsters have exploited to gain crucial information about customers. Regrettably, this has in some cases been facilitated by unscrupulous employees of these companies.

It is also crucial that these institutions carry out customer education, making sure that they understand what information they can disclose to banks’ agents and what information is supposed to be personal. In this era of digital banking, personal information in the wrong hands can help fraudsters clear your bank account or your mobile wallet.

A study by Marryane Wamuyu published by the United States International University  titled; “Fraud in the banking industry in Kenya; A case of Commercial Bank of Africa, Kenya” found that cash theft, use of forged documents, cards fraud, letters of credit fraud and impersonation were the other common forms of fraud in Kenya’s banking industry.

Rosemary Njeri says her dad lost about Sh. 3 million from a bank in Kisumu through impersonation.

“My old man was working in South Sudan as a country director for a well known NGO. He was banking with one of the local commercial banks in Kisumu and that’s where his salary was credited in dollars. It was not an account he would utilize often as he mostly saved that money for his investment projects. He would come home every three months or so. He was also well known to the staff at the bank. This one time he comes back home and goes to withdraw money as usual. He was shocked to find a huge chunk of money missing – about an equivalent Sh 3 million but in dollars,” explains Njeri.

A review of the photo of the person who made the withdrawal as captured on the bank’s CCTV and that of Njeri’s father revealed that there was not even a close resemblance. The bank employees who authorized the transaction clearly ignored the basic KYC protocols.

Incidents such as these two, which are in no way isolated paint to a growing picture of banking fraud which if left unchecked can erode the confidence customers have in financial institutions. While banks like Equity are continuously innovating to curb this trend, there is need for a multisectoral approach in dealing with the vice that involves both the industry players and regulators. It’s a problem that should not be left alone to individual banks to figure out how to curb. This is not to say that banks do not have a role to play at their individual capacity to safeguard their customers’ deposits.

The study by Maryanne Wamuyu quoted earlier identifies the “use of ICT tools such as passwords and firewalls, strengthening of internal controls and systems, encouragement, communication, rewards and recognition of employees, performance management, improvement in hiring systems and policies, use of expected and unexpected audits and use of analytical tools,” as some of the ways banks can help protect their customers’ deposits.


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