The Need To Curb Identity Theft In Nigerian Banks By Anthony Eze

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Last year, the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, said that the bank was investigating some high-profile cases of insider abuse by members of the board of directors of some commercial banks and other financial institutions in the country. Consequently, the CBN Governor warned that there would be no hiding place for any Bank Chief involved in dubious loans.

According to him, the recent economic recession showed shocking governance weaknesses in the Nigerian financial service sector, as unreported losses, huge severance packages for directors and insider non-performing loans incurred by overbearing bank executives, in utter disregard to regulatory prudential guidelines, were common occurrences.

CBN’s tough stance is appropriate and timely. Such measures will strengthen the regulator’s hand and make the banks to comply with extant prudential guidelines. It is necessary that confidence, which is the cutting edge in the banking and other financial services sector, is restored. Undoubtedly, insider abuse is a big threat to banking industry.

Unfortunately, some bank chiefs had taken undue advantage of their insider knowledge, special access and privileges to commit fraud. Some banks have collapsed as a result of this malfeasance. Depositors and investors are the worse for it. Such loans corruptly obtained by them are often unrecoverable, owing to the volume and waivers granted to the officials against the interest of depositors.

It is therefore, good that the CBN is aware of the need to strengthen its hands against insider abuse and to keep the banks in good stead. The sector cannot afford a repeat of the past banks’ indebtedness and collapse. For instance, in 2009, a CBN report showed that the indebtedness of former bank directors of 13 failed banks totaled forty-eight point six billion naira. This evokes deep concern.

In the past five decades, Nigeria had witnessed three bank failures due largely to poor regulations and non-enforcement of appropriate sanctions of financial recklessness of the directors and management, lack of corporate governance standards and inadequate operating capital requirements and unrefunded loans. Indeed, the unethical and disturbing trend of insider abuse, which pervades the banking industry today, if unchecked through appropriate legislation and sanction, will continue to portray the sector in bad light, and perhaps give the impression that Nigerian banks are unsafe for depositors, who are the ultimate losers in the event of insolvency or outright collapse.

As the CBN noted earlier, most of the insider abuse revolves around “identity theft and abuse of authorization.” We believe that the CBN will follow through with the sanction that may become necessary at the conclusion of the ongoing probe. We say this because past measures put in place by the regulator to rein in erring directors were circumvented. Though insider abuse is not defined in the Bank Secrecy Act, it is captured in the bank’s Special Assessment Regulations (SAR), whereby employees and top officials constitute about seventy-two per cent of the infractions, using insider knowledge to commit fraud. Strengthening the Corporate Governance Code will breed trust and confidence, which in turn, will ensure that the banks are run efficiently and profitably.

In addition, we urge that the regulator should ensure strict compliance of its circular of 2015, directing deposit money banks to implement a marker/checker control structure for all payment platforms, including account database maintenance on core banking systems.

We welcome the review of the board of directors charters and fixed tenure for chief executive officer/managing directors of banks. In all, the CBN should ensure, as it has promised, not to fold its arms while owners of some banks impose incompetent management or board to oversee the affairs of the banks. At all times, depositors’ funds should be protected.

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