Between the period April 2012 and April 2013 Kenyan banks lost $17 million to fraudsters. Investigators were able to recover just Kshs 530 million only. Most of the fraud schemes are organized by technologically savvy bank workers. This is shocking amounts of money that is stolen from customers’ bank accounts. Most of these fraud cases are pending in court.
It is clear that the amounts which are reported are just small fractions of the real amounts stolen. Most banks prefer taking internal disciplinary measures against the fraudsters as compared to taking them to court.
Banks fear reputational risk because it is the worst of all bank risks. This explains the reasons why most banks hide a large number of fraud cases because they fear the damage that it will cause to their banks.
The Banking Fraud Investigations Department has shown that more than half of all the bank fraud cases involve bank employees.
Some senior executives in Kenyan banking industry have reported that the actual amounts lost through fraud can be as much as three times the reported figures.
The increasing number of frauds as an indicator that banks have to look out for the best preventive and detection mechanisms because the fraudsters are becoming more and more sophisticated.
Types of bank frauds
There are several forms of bank frauds. The most common are: identity theft, bad cheques, loan fraud, credit card fraud, electronic funds transfer online frauds and forgery of documents. These are just some of the methods used to fraud financial institutions in Kenya.
Inability for financial institutions to seal loopholes
The fact that most of the fraud cases keep recurring raising concerns about the ability of financial stakeholders to seal the loopholes in the banking industry. The banks worst by fraud in Kenya include: Cooperative, Equity, Standard Chartered, KCB and Barclays. These are the 5 largest banks in Kenya.
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