Exposing banks to fraudsters

By Kipngetich Yegon

The liberalisation of the financial industry has led to opening up of the banking industry which has subsequently led to increased competition.

As a result, most of the banks do anything to get as many clients as possible.

Indeed, the media outlets are awash with adverts of their various products and services as the banks hawk their services on the streets.

This has, however, exposed the industry to fraudsters who pass as genuine customers since most of these institutions are ready to receive any clients.

Increase in fraud

This has led to an increase in the number of frauds being committed every year, a fact which security officials attest to.

According to the Banking Fraud Unit there are various types of frauds which criminals use to target financial institutions.

Bank customers queue for services in a bank. Some of them realise when it is too late that fraudsters have taken loans in their names. [PHOTOS: MARTIN MUKANGU/STANDARD]

The first type of fraud is one which is committed by an individual in his own name so as to benefit with a facility which they would otherwise not be able to qualify.

A person might forge his own payslip and bank statements before presenting them to a financial institution with the aim of securing a loan, which they would otherwise have not been able to get.

"These kind of fraudsters are people whose payslips are over committed with loan deductions. They forge their payslips so as to reflect a better credit rating and therefore qualify for a facility which they would otherwise not be able to access," says Mr Gabriel Mbuvi who is incharge of the Banking Fraud Investiging Unit.

The other form of fraud is that of identity theft where a fraudster may get hold of a another person’s identification documents and account details and use them to his own advantage.

They either steal national identity cards or payslips and use them as if they were their own. Some even collude with payroll officers of the victim’s employer so that they can acquire original payslips.

"They will then use these documents to either apply for loans or open fraudulent accounts through which they will use to execute various crimes. Once opened they will use these accounts to deposit stolen cheques," adds Mbuvi.

"In the process of following up a reported crime, you will realise that in such cases, the person whose name appears is innocent and is not aware of what is going on," he notes.

Parallel accounts

Criminals may also get the documents, particularly company documents, and open parallel accounts with the same names and use them to deposit stolen or forged cheques.

Some IT savvy criminals will even intercept email communications and change wiring instructions and redirect the money into these accounts.

By the time the red flag is raised, it is mostly too late for the targeted firms as the criminals will have already made away with the loot.

Most of the criminals are usually part of a syndicate that may include payroll officers of companies and some banking officials. They collude to divulge confidential information such as client’s loan status and give criminals access to documents such as payslips and bank statements.

Mr Alex Mwangi, a security official at a leading commercial bank admitted that most of the fraudulent cases are those that would not pass if banking officials were keen and adhered to the set procedures when attending to clients.

He notes that most of the fraudulent transactions in most cases will not go through unless a banking official colludes with such criminals.

All financial institutions have a set procedure through which a would be or existing client is subjected to before being attended which is usually referred as KYC (Know Your Customer) in the banking circles.

This will include ensuring that the customer has valid and original identification documents. If it is an existing customer, they check for his signature, contact details and photo in the system.

After verifying all these details, they can then serve the customer.

In the event that one stage is overlooked, it would be opening a loophole through which a fraudulent transaction can be executed.