KPMG and GAB collaborate to tackle Fraud Risks in Financial Services
Fraud continues to evolve, considerably shaped by rapid technological advances and the complexities of today’s financial system. Last Friday, 29 November 2024, KPMG in collaboration with the Ghana Association of Banks (GAB) hosted a Fraud Risk Webinar under the theme: “Managing Emerging Fraud Risks in Financial Institutions”. This event brought together regulators, industry stakeholders and subject matter experts to discuss the 2023 Bank of Ghana Fraud Report and explore practical strategies to strengthen Ghana’s financial ecosystem against emerging threats.
This publication captures the key insights, actionable takeaways and expert recommendations shared during the webinar. Whether you are a banking professional, policymaker, customer or simply interested in the fight against fraud, this report provides valuable perspectives on addressing fraud risks in an ever-evolving financial environment.
Moderator and Panelists
The webinar was moderated by Andy Akoto, Partner at KPMG, who set the tone for an engaging discussion. The distinguished panel included, John Awuah (CEO, Ghana Association of Banks), Dr. Kwasi Osei Yeboah (Head Financial Stability, Bank of Ghana), Benjamin Chemel (Head Risk and Compliance, ARB Apex Bank), Saheed Olawuyi (Partner, KPMG) and Anoop Sharma (Director, KPMG).
Each panelist brought unique insights into the discussion, enriching the dialogue on fraud prevention and risk management.
Opening Remarks
Andy Akoto, in his opening remarks, outlined the context of the 2023 Bank of Ghana Fraud Report. The report covered regulated institutions, including Universal Banks, Specialised Deposit-Taking Institutions (SDIs) and Payment Service Providers (PSPs).
Key findings from the report revealed a 5% increase in reported fraud cases compared to 2022, with GHS 88 million in total losses across the sector. Of this, the banking industry accounted for GHS 63 million, underscoring the need for enhanced fraud prevention measures. The report also highlighted emerging fraud typologies such as SIM swap fraud, alongside more traditional schemes like cash theft/suppression, cyber fraud, document forgery and cheque fraud.
Mr. Akoto emphasized the challenges posed by the digital economy, particularly the risks associated with generative AI and digital assets. He noted that maintaining trust, the cornerstone of the banking system, demands proactive measures to combat these evolving threats.
Mr. John Awuah also remarked on the evolving nature of fraud, stressing the need for a proactive and collaborative approach to address emerging threats including cyber risks and insider fraud.
Panel Contributions
Overview of Fraud Trends
The discussion shed light on emerging fraud typologies and key trends impacting Ghana's financial sector, drawing parallels with other markets, particularly Nigeria and Asia. Traditional methods such as cash theft, forgery and unauthorised withdrawals remain prevalent in both countries. However, fraudsters in Nigeria have demonstrated more advanced technological capabilities, exploiting vulnerabilities in mobile banking, POS systems and internet banking.
Recognising the migratory nature of fraud trends, the panel underscored the importance of collaboration and partnerships among industry stakeholders to strengthen the banking sector.
Globally, fraud trends in West Africa showed similarities to those in Asia, with notable differences in the rise of credit/loan fraud and account takeover fraud in Asian markets. These were often driven by digital identity theft, data breaches and the use of money mules.
Impact of Fraud on Financial Stability and Public Trust
Fraud strikes at the heart of public confidence in the banking system, making it imperative for stakeholders to reflect and take action. The panelists noted that the banking industry is undergoing a transformative shift, incorporating advanced technologies and moving away from traditional brick-and-mortar operations. While these developments offer opportunities, they also introduce inherent risks that demand a shared commitment from all stakeholders.
Financial institutions, given their expertise and resources, should lead the charge in assessing and mitigating risks tied to their products and services. Issues like cash suppression, often involving insiders, highlight the need for improved governance in recruitment and third-party engagements.
Addressing Internal Staff Involvement in Fraud Cases
Staff involvement in fraud remains a key concern for the banking sector. The panelists emphasized the importance of bridging the gap between well-designed controls and their implementation. Regular testing of these controls ensures that potential loopholes, which could tempt employees and subject them to the fraud triangle factors of opportunity, pressure and rationalisation, are identified and addressed.
Creating awareness among staff about the consequences of fraudulent behaviour is important. Clear and consistent enforcement of disciplinary actions, regardless of hierarchy, reinforces accountability and deters misconduct. Furthermore, educating customers on fraud risks, particularly on digital platforms, helps mitigate vulnerabilities often exploited in collusion with staff.
Another aspect is monitoring lifestyle indicators of staff, such as unexplained wealth or lavish spending, which can signal fraudulent activities. Anonymous whistleblower mechanisms are equally important to encourage employees to report suspicious activities without fear of retaliation.
Fraud in Rural and Community Banks
Panelists noted that rural and community banks encounter unique challenges when addressing fraud, primarily due to operational and technological limitations. High instances of cash suppression often arise from reliance on manual deposit recording, where mobile bankers collect funds but fail to remit them. While some banks use technology to send transaction alerts, network issues and customers’ low literacy levels undermine the effectiveness of these safeguards.
Credit fraud is another pervasive issue, with credit officers creating ghost names in group lending schemes to siphon funds. Impersonation, document manipulation and granting loans to fictitious customers further exacerbate the problem. Also, ethical lapses at governance levels, such as board members influencing loan approvals or failing to repay loans, undermine fraud prevention efforts.
To mitigate these risks, rural banks should invest in robust technology, such as POS systems and agency banking to enhance transparency and reduce reliance on manual processes. Coupled with ethics training, stricter recruitment processes and consistent enforcement of sanctions across all levels. These measures can help curb fraud in the rural banking sector.
Role of Emerging Technology
Technology was identified as both a risk and a solution. Panelists highlighted that fraudsters were leveraging advancements in mobile and internet banking to commit high-value fraud. Conversely, financial institutions were encouraged to combat this by adopting tools such as machine learning, AI and blockchain technology to enhance transparency and fraud prevention.
Emerging Fraud Risks and Mitigating Factors
The rapid digitalisation of the financial sector is accompanied with emerging fraud risks. Payment Service Providers (PSPs) for instance were highlighted as reshaping the financial ecosystem reflecting growth but also revealing heightened exposure to fraud. Panelists stressed that with these advancements, financial institutions and regulators must step up to collaborate and leverage their expertise by implementing robust risk assessments, establishing comprehensive governance frameworks, and addressing vulnerabilities before they escalate.
Panelists emphasized that it is no longer enough to design internal control on paper; banks must ensure that these controls are rigorously tested and function effectively. Other mitigations highlighted were increased customer education and increased stakeholder collaboration.
Call to Action
The discussion concluded with a call to action, urging stakeholders across Ghana's financial sector to take immediate, coordinated and innovative steps to tackle fraud. Every stakeholder, from banks to regulators to customers, has a role to play in this fight. KPMG is also well positioned to support financial institutions to address the issue of fraud. As fraud threats continue to evolve, particularly in the digital age, the message was clear: safeguarding the financial system requires a proactive, collaborative and technology-driven approach.
Together, we can build a financial system that is not only secure but also trusted by all. The time to act is NOW.
Key Takeaways
1. Invest in Governance and Internal Controls
Financial institutions must strengthen their governance frameworks by conducting regular fraud risk assessments and improving oversight mechanisms. This includes enhancing internal controls and conducting staff lifestyle audits to detect and deter fraudulent behaviour.
2. Leverage Advanced Technology
Stakeholders must embrace the transformative power of technologies like AI, blockchain and machine learning. These tools can help identify fraud patterns, improve customer risk profiling, and ensure greater transparency in financial transactions. Adopting real-time monitoring systems will be crucial in staying ahead of emerging threats such crypto-related schemes.
3. Enhance Collaboration Across Institutions
The need for collaboration among banks, payment service providers, and regulators was emphasized as a cornerstone for fighting fraud. Institutions must work together to share intelligence on emerging fraud typologies, creating a united front against systemic risks.
4. Empower and Educate Stakeholders
Both customers and staff play a critical role in combating fraud. Comprehensive fraud awareness programs for customers can equip them to recognise and avoid scams, while cross-functional training for staff will build a resilient workforce capable of detecting and mitigating threats.
5. Engage Regulators for Support and Feedback
Regulators like the Bank of Ghana must continue to provide clear directives and ongoing feedback loops to financial institutions. This will ensure that anti-fraud measures remain robust, compliant and adaptive to emerging challenges.