Fraud Management and Control

KIB’s aggressive agenda to help banks fight fraud and money laundering

The Kenya Institute of Bankers [KIB] has developed an elaborate strategy to help
Kenyan banks fight fraud and money laundering in the financial sector.
This comes at a time when many financial institutions in Kenya are grappling with
mechanisms to manage and control fraud and money laundering, which vices are
rapidly on the rise both locally and globally.

“As the umbrella body for all banks in Kenya, we are obligated to help set an agenda
that will in the long run provide practical solutions to the fraud and money laundering
menace we have witnessed in recent years,” says KIB CEO Julias Alego. “That is why
we have most recently come up with an elaborate plan to help our banking institutions in
Kenya in regard to these vices.”

Mr. Alego, who assumed the reigns at KIB in early February 2021, has been instrumental in not only championing an agenda for a unified front in the fight against vices in the banking industry, but is also leading the charge to help banks develop smarter solutions to the ever-changing global banking landscape.

“Right now, there is no bank that is immune to various threats, including cybercrime,” he says. “Our objective is to ensure there are platforms and programs that are effective enough in addressing and offering mitigation for any case scenarios that may arise in this regard.”

Subsequently, KIB has developed a double-pronged strategy to tackle these threats through training of banking fraternities as well as the engagement of reputable local and international institutions that have the tools and resources that can effectively curtail and neutralize fraud, money laundering and cyber security threats.

The elaborate training programs are specific to the needs of each banking institution, and KIB has embarked on aggressive charm offensive to develop custom-made modules that will suit each banking institution. Already the institute has undertaken major training engagements with some of the leading banking institutions in this regard, and plans are underway to ensure all banks and financial institutions are granted the opportunity to benefit from these training programmes.

“We have carefully researched the material in use for these trainings,” says Mr. Alego. “The amount of research that has gone into developing the training manuals has been immense. We have secured the services of some of the best brains in the industry to help us lead this charge. We are currently inviting each financial institution to register their interest in these trainings to ensure their staff members are fully equipped to fight these financial sector challenges.”

In this regard, KIB has organized a Fraud Management and Control Seminar, which is scheduled for September 6-8, 2021 at the Hilton Hotel. This is one among the many Seminars that will held towards fighting fraud. Each bank is also at liberty to request for personalized training that can be done internally for its staff only.

KIB is also organizing for a cyber-security conference that is slated for October, which is a Cyber Security Month. The conference will feature some of the leading firms that provide Cyber Security in Kenya, who will help banking institutions to safeguard their digital financial activities.

“We are currently working with certain institutions to help us pull off a successful conference in the month of October,” Mr. Alego says. “This conference will highlight the very present threat of cybercrime, and how we should prepare to tackle and push back effectively. We invite all banks to participate.”

Mr. Alego is apprehensive that fraud and money laundering, on the other hand, are threats that remain dicey for the industry. “This justifies why we must come together as an industry to provide a unified front in fighting these crimes. KIB has taken the lead because our member institutions look up to us to provide guidance and leadership on such fronts. That is why we are taking this agenda seriously.”

According to a recent report by PricewaterhouseCoopers [PwC] dubbed “2020 PwC Kenya Economic Crime and Fraud Survey”, organizations face multiple threats in terms of where the next economic crime attack would originate. It could be internal; from the Board, management, operations staff; it could also be external; your customers, organized crime syndicates, suppliers; or a joint effort where both internal and external parties collude.

According to the report, the perpetrators include Operations staff. Fraud committed by operations staff was the highest of the fraud attributed to internal actors at 53%. It could be an indication of the ineffectiveness of controls at lower levels or more daring attempts by junior staff. Middle level management was the most active group of internal actors in 2018 (decreased from 41% to 28%). Kenya, however, seems to be the exception, as elsewhere, senior management were reported to have committed more fraud.

Customer Fraud also continues to be rampant, topping the list of external perpetrators of economic crimes at 43% of externally perpetrated economic crimes.  Instructively, whereas Customer Fraud is the most prevalent globally at 35%, it is lower in Kenya where the prevalence rate is 32%.

Vendors and suppliers are not spared either. The report indicates that as more companies invite vendors and other third parties into their organizations’ operating environments through outsourcing of various services,  they expose themselves to risks from parties  seeking to illicitly enrich themselves at their  expense. With 34% of economic crimes attributed to these third parties, this paints a scary picture as to the level of trust needed and risks organizations face in the business environments they are forced to operate in.

“It is some of these statistics that make us burn the midnight oil in order to help our financial sector players. We are determined that these vices will be tamed by all means, and that is why we are taking the lead role in ensuring our banking institutions are effectively equipped to fight,” Mr. Alego says.

Since joining KIB almost eight months ago, Mr. Alego has been working with industry players to develop strong partnerships that will help the sector forge forward in common accord. He has also set out with the clear agenda from the Governing Council to fully digitize KIB, apart from transform the giant banking institution in a competitive 21st century organization with the capacity to effectively train institutions in various emerging banking practices through both online and offline platforms.

“Apart from digitization, my responsibility right now is to forge great partnerships, to craft relevant policies for KIB, to enhance financial sustainability and to strengthen the academic board in order to offer modern courses to banking students,” Mr. Alego says, as he makes reference to his Five-Point Transformation Pillars. “Look out for a more rejuvenated and revamped KIB that will not only train member institutions on various need areas, but will also give the banking sector a fighting chance against modern financial practice crimes and challenges.”

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