Bank fraud: Fresh concerns over contract staff

Both the CBN and NDIC warned lenders against giving sensitive roles to outsourced workers

There are indications that the growing tendency among banks to give sensitive positions to contract staff is heightening the risk of lenders being hit by fraudsters.

Findings by New Telegraph show that despite repeated warnings by the Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC), banks not only continue to hire contract staff, but have started assigning these employees to sensitive roles that were previously reserved for full time or permanent staff.

A well-placed source, which attributed the development to the need for banks to cut costs in the face of a tough economy and rising competition, blamed it for most of the fraud cases recently recorded in the industry.

Indeed, a “concerned” Head of Operations at a Lagos branch of one of the leading banks in the country, who asked not to be identified, revealed that contract staff were directly and indirectly involved in the two cases of fraud recorded at his branch in the past two months. 

He said: “In the first incident, one of the contract staff at the branch was able to siphon about N40 million belonging to one of the big Pentecostal churches in the country, while in the second incident, another contract staff was suspected of providing information to fraudsters who succeeded in stealing N4 million from a customer’s account.”

According to the bank official, more contract workers, compared with their permanent staff counterparts, are perpetrating fraud because of their relative poor remuneration.

He argued that with more banks deploying contract staff to increasingly more sensitive positions in a bid to cut costs, the likelihood of these workers – given their meager salaries – succumbing to the temptation of getting involved in fraudulent acts also increases.

“Before now, contract staff were not assigned to Automated Teller Machine (ATM) watch duties. You will also hardly find them being told to perform customer service duties. But all that has changed. Furthermore, in the past, most banks usually set a maximum value of between N200,000 and N500,000 as the limit for risky transactions that a contract staff  can undertake, but these days, this limit has been raised to N1 million.

“Yet these are people that are paid N60,000 compared with full time staff that earn between N120,000 and N200,000. Of course, it is not difficult to see why some of them (contract staff) will not be able to resist offers from fraudsters, especially in these hard times,” he stated.

This newspaper also gathered that following a significant increase in the number of fraud cases it was recording, a Tier 1 lender, a few months ago, disengaged many of its contract staff and hired fresh graduates.

It will be recalled that the CBN Director, Banking and Payments System Department, Mr. Dipo Fatokun, revealed  last year that the apex bank had advised lenders to desist from giving sensitive banking roles to contract staff as they may not have a stake in the financial institution.

He said: “A temporary staff may not have a stake in the bank so to say. So, it is encouraged that if they have staff that are not permanent, they should not give them responsibilities or roles that will expose them to critical functions of a bank.

“If you are giving somebody an authority to approve transactions of high magnitude and he does not have a stake in your bank, then you are already exposing yourself. So, this been going on and I believe many banks understand the need to rely on their key staff for major duties. That is one of the reasons the fraud attempts have been rising, but the value lost declining.”

Similarly, in the past two years, the Managing Director and Chief Executive of the NDIC, Alhaji Umaru Ibrahim, had been repeatedly warning banks against the use of outsourced staff, pointing out that in 2015, over 75 per cent of fraud cases in the banking sector was traced to outsourced bank staff.

He revealed that bank examination reports indicated that the high incidence of fraud and forgeries in the banking system was linked to outsourced or contract staff.

The NDIC Chief Executive Officer also stated that in as much as regulators appreciated the necessity for banks to cut costs, it was incumbent on all stakeholders to fashion out capacity building and other strategies to motivate all employees to contribute positively rather than engaging in criminal acts that impact adversely on the entire banking system.

Interestingly, Ibrahim had told finance and business journalists in Ilorin in October 2015 that 64 per cent of fraudulent activities in the banking industry in 2014 were traced to temporary staff member of banks. 

According to fraud statistics contained in the latest Nigerian Electronic Fraud Report, which was prepared by the Banking and Systems Payment Department of CBN, the banking industry recorded 31,736 fraud cases involving the sum of N16.5 billion between January 2014 and December 2016.

The study showed that the frauds were perpetrated through various payment channels such as Across the Counter, ATMs, cheques and electronic-commerce platforms. Others are Internet banking, mobile banking, Point-of-Sale and web transactions.

The report stated that in the last three years, there had been more attempts in the number of fraud cases, adding that the development could be linked to the tough economy.

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