As fraud cases in Kenya increase, and the Central Bank of Kenya pledging tougher regulations, at least one major bank is turning to Swiss fintech company NetGuardians for its anti-fraud solutions.
Worldwide, fraud is a growing concern for banks, causing great losses both in terms of customer trust and money. In 2014, the report of the Association of Certified Fraud Examiners estimated banking fraud costs $67 billion globally.
Kenya has recently seen such devastating effects of fraud, notably in the cases of two major banks placed under receivership by the Central Bank of Kenya (CBK): Dubai Bank, which was closed in August, and Imperial Bank, closed in October 2015.
Dubai Bank was found to have violated rules concerning liquidity-capital ratios, and Imperial Bank was closed for unsafe banking practices including irregular loans. CBK since announced stricter supervision and are looking for enhanced early warning systems to detect improprieties and protect bank clients.
For commercial banks operating in Kenya, protecting themselves and their customers from fraud must be a prime objective. A leading Swiss Fintech company, NetGuardians, is gaining notice for its unique software solution that provides critical controls against fraud, assisting in compliance with national and international regulations.
In the past few years, NetGuardians has already earned a strong reputation throughout East Africa, including Kenya, and these recent fraud revelations have underlined the value of their offer. One major bank is taking a proactive stance, having recently joined NetGuardians’ roster of clients in Kenya.
NetGuardians’ FraudGuardian solution is based on NG|ScreenerZ, a smart behavioural analysis software based on policy rules and predictive analysis. With Big Data to correlate human behaviour and financial transactions across entire banking system, it can identify potential fraud before it happens. It tracks and audits all activities continuously, in real time, and instantly alerts risk managers to any deviations.
“The Imperial Bank case provides an excellent example of how FraudGuardian can protect banks,” explains John Kiptum, NetGuardians IT Risk & Internal Control Consultant, who is based in Nairobi.
“Imperial Bank was found to have fraudulent activities of substantial magnitude, relating largely to irregular granting of loans in violation of the statutory limits to a single borrower. As per Central Bank regulations, banks are supposed to send data regarding their asset portfolio, but Imperial Bank directors had colluded to misrepresent their financial health. FraudGuardian would have been able to expose the fraud and cover-up through its continuous monitoring. It proactively highlights and reports internal and external fraudulent activity and integrity breaches. FraudGuardian would also have been able to automatically provide necessary audit trail and forensics needed to unravel the mess and help prevent future incidents.”
Kenya is not alone in this situation. Nigeria, for instance, reported the highest value in fraud losses out of all African countries.
In 2014 alone, fraud losses on payment channels were over 6.2bn Nigerian Naira, which was a sharp increase from 485m in 2013, according to a report of the Nigerian Inter-Banks Settlement System (NIBSS).
NetGuardians’ fraud management system covers all channels (e-banking, mobile banking, front-office, back-office), IT systems, and financial transactions across the bank.