By Tanu Jalloh
I have said it, not once but twice, that Sierra Leone should endeavour to generate some feasible domestic policy frameworks that appeal to global financial or banking security efforts.
Where this fails, the integrity of the country’s economy is undermined. And the corollary will invariably adversely affect investor confidence, increase suspicions around relationships with bilateral groups and dampen commitments by donors. And the Bretton Woods too.
Again, I have the cause today to visit my call for a secure and near fraud-proof banking transactions in Sierra Leone. I am not oblivious of the ever growing technology challenges and the lack of expert capacity.
My fear comes at the back of the recent claims of probably Sierra Leone’s biggest cases of banking fraud, involving some unbelievably huge sums of money with some commercial banks.
I still believe that that theft could have been averted if we had a system that works. In all the three matters being investigated by the Criminal Investigations Department of the police, fraud was conceived, instituted and perpetuated by some low level criminals who function as businessmen and collude with staff at the banks to steal. It is incensing that a certain Kabbah Kalu, who by my estimation is not even tech savvy, could fleece commercial banks of Le40 billion (which is about US$9.3 million).
Thus the thrust of this piece will be, to go beyond the episodic manner in which issues of banking fraud have been covered and reported by the media. It is too serious an issue to be addressed superficially while a few criminals connive with bank managers to defraud a weak and poor client base–the majority of customers.
There is a strong correlation between financial sector development and economic growth in many ways than one.Therefore, loan facilities have become the buoy for fraudsters, in spite of the fact that they constitute a major economic empowerment mechanism for the private sector and entrepreneurial base of emerging economies.
Although in 2011 gross loans and advances increased by 14.3 percent with non-performing loans falling slightly to 14.96 percent when compared to 15.61 percent for 2010, such credit facilities have been corrupted. They have become the reasons for rampant cases of fraud and theft in the commercial banks.
In his financial sectors development summary to the 2012 annual gathering at the Bank Complex in Freetown, Sierra Leone’s Bank Governor, Dr Sheku Sambadeen Sesay observed that: “Despite these achievements in the banking sector, there are growing numbers of cases of fraud involving staff of commercial banks. This has necessitated collective action between the Bank of Sierra Leone and the commercial banks to strengthen internal control mechanisms in place and to ensure that names of dismissed staff are entered into a “black book” to prevent culprits from being recycled”.
Dr. Sesay oversees the institution that regulates the conduct of commercial banks in Sierra Leone.But questions around the capacity of who administers the law on banking security do not seem to have been adequately addressed, owing of course, to the level or otherwise of regulatory sophistication and lack of political will. The banking industry gets pervasive by the day but also very evasive in terms of the ultimate goals of businesses who do business with financial institutions that also operate as businesses.
In January 2012 the then Chief Superintendent of police in charge of the CID, Alfred Karrow Kamara said within six months they received reports of 23 cases of bank fraud involving commercial banks and customers. They found out that banking officials conspire with customers to withdraw huge sums of money from the bank without the notice or approval of the management.
This might not be strange. Even in secure environment of financial services, dealing with problems of fraud and other issues of insecurity around the operations of banks and other financial institutions would hinge on the strength of the set of regulations that governs the industry. That seems to be lacking here, at least given the latest cases of bank fraud.
In neighbouring Liberia the Solicitor General Beatrice Larmie Blamo, appointed in June of this year, observed that bank fraud, which was on the rise in several of the commercial banks and being allegedly orchestrated by employees, had serious implications on the country's economy.“The money those employees have taken away are not the bank's money, rather it is our money,”she recently told a state radio’s morning show.
Ideally, with regulations, conformity is imperative but with ethics all of them are conformable. This means in the absence of state regulation, ethical considerations must prevail. But banks, the world over, have the tendency to cheat in their quest for profit maximisation, falsify interest rates, and lie about their healthy financial standing or fake asset acquisition as collateral to regulatory bodies.
While the situation gets near hopeless in Sierra Leone, with huge economic prospects and investor confidence, Nigeria had had its own share of poor banking regulations. The continent’s second largest economy had its financial sector pruned and its aristocrats tamed, with 14 banks surviving the overhauling, by Central Bank Governor Lamido Sanusi.He sent shock waves through the corporate establishment, sacking the chiefs of eight of the banks and felling pillars of Nigeria’s financial aristocracy who had long seen themselves as beyond the reach of the regulators.
Looking at the susceptibilities of the banking sector to hazards with particular reference to fears around risk management, control and oversight, strength and preparedness of the central bank to provide adequate supervision in 2012, I realised that the trials of a flagging relationship between the banking regulator,its authority and the financial system could be at risk more than ever before. Today we are talking about grand fraud.
In the United States of America and United Kingdom, for example, there are oversights bodies that ensure standard operational procedures with utmost respect for financial traditions or principles and transparent transactions – be they interbank or client based.In other words, banks should not deal with one another often without letting the regulator know the extent or details of their transactions or simply operating accounts on behalf of ROGUE BUSINESS PEOPLE.
But where the foundation of banks is shaky and may crumble unless those banks lie about their financial and transactional health, independent regulatory bodies like the Bank of Sierra Leone should be ready and able to come in and safeguard people’s savings.
