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Banks Covering Up Fraud as Customers Lose Billions

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Kenyan banks are covering up fraud, circumventing Central Bank of Kenya (CBK) regulations that require lenders to report fraudulent activities within two hours, a report authored by British financial inclusion lobby group Financial Sector Deepening (FSD) Kenya has revealed.

FSD’s report dubbed  Inclusive Finance? which draws its observations from the Finaccess 2019 Household Survey jointly authored by the Central Bank of Kenya (CBK), the Kenya National Bureau of Statistics (KNBS) and FSD intimates that banks are aware of fraudulent activities within their ranks that put their depositors’ funds at risk but still chose to remain tight-lipped.

The report states that 220,000 bank account holders who account for 3% of bank users in Kenya have reported losing their money from their accounts this year.

However, 75% of them were able to recover their money after engaging their banks.

“The fact that three quarters were able to recover their funds suggests that loss of money within the banking system is not just a self-reporting accuracy, but a well recognised issue for the banks concerned,”

FSD Report

These findings could raise the debate on just how safe depositors’ money is with lenders, questions that compound on the lenders’ troubles who faced reputation risks this year when the Office of the Director of Public Prosecutions (ODPP) in February this year implicated a large number of Kenyan banks in the National Youth Service (NYS) heist.

In July this year, CBK published new regulations that require banks to report fraud within two hours. The new regulations are meant to protect the economy from cyberattacks which have become more prevalent in the last five years.

Previous incident
On October 1, the Directorate of Criminal Investigations (DCI) arrested three suspects believed to have stolen Ksh970,000 from Faith Wanjiku, a 73-year-old woman.

Read: Kenyan Lenders Being Forced Into Risky Lending

Anthony Babu Kaira, Kelvin Maina, and Joseph Kariuki were arrested after investigations indicated that they could have been involved in siphoning the money from the granny’s Equity Bank account through the bank’s Eazzy Pay app, a mobile application that digitizes the bank’s financial services.

DCI George Kinoti in a statement said that the money was siphoned from the granny’s account using the Eazzy App in four transactions.

Ksh300,030 was channeled to Kaira, Ksh300,030 to Maina, Ksh300,030 to Vivian Jelagat and Ksh70,000 to various equitel numbers.

One of the most striking aspects of that case is that Ms Wanjiru did not own a smartphone at the time and was not tech-savvy to know how to use the app. 

See also: How Churches are Making Billions from Gullible Christians

She had never lost her ATM but upon reporting the matter to the bank, she was accused of sharing her pin with a third party which she vehemently denied.

The money swindled from her was part of some Ksh2 million she had deposited into the account after selling a parcel of land.

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