Fraudsters infiltrate Kenyan banks

May 5, 2011

, NAIROBI, Kenya, May 5 – The Central Bank of Kenya (CBK) has raised the alarm that an increasing number of bank employees in Kenya are colluding with fraudsters.

 Central Bank’s Head of National Payment System Stephen Mwaura said on Thursday that fraudsters had resorted to bank staff after the institutions invested in sound financial systems.
“Because of the secure nature of the systems in place, the fraudsters are going after internal staff to alter documents in their favour making off with huge sums of money,” he said.
According to a forensic report prepared by Deloitte, Banking fraud is estimated to have tripled to Sh3 billion last year with majority of the theft occurring on the Real Time Gross Settlement System (RTGS) through which all payments above Sh1 million are processed.
Mr Mwaura however said the RTGS was impenetrable, prompting the swindlers to look for alternative ways of making off with the money.
“We have a much safer payment channel than we have ever had before and we are continuously carrying out reforms that make it even more secure,” he said.
According to the Deloitte report banks lost an average of Sh246 million a month, with almost half of the total amount lost during the year not being recovered.
“Banks should sort out their internal controls because at the end of the day, banks should ask themselves whether they have the right people in the right places,” Mr Mwaura said.
One measure the banking industry is taking to curb the menace is the introduction of the Cheque Truncation System (CTS), which will standardise the issuance of cheques in the country and make their use more secure.
The Kenya Bankers Association (KBA) together with CBK have automated the clearing cycle to replace the current manual process that they deem has been slow and prone to abuse by fraudsters.

With its implementation from June 1, there will be establishment of an automated clearing house that will put the country on one clearing zone with cheques expected to be cleared within three days.

Safety features on the new cheques will include standard watermarks, holograms, use of ultra violet paper and micro text features to reduce the threat of fake cheques.

The association’s ICT Consultant Fidelis Muia said stamping on cheques would now be made on the back, creating consistency between all banks and sealing loopholes. 

The new system will enable a cheque image to be transmitted electronically to the clearing house and subsequently the bank where the account is held. This eliminates the physical collection of cheques at bank branches then transporting them to headquarters and to the clearing house in Nairobi.
From January 2, the clearing cycle for cheques is expected to reduce to two days with the industry working towards bringing it down to one day.
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