African Alliance shifts from cheques to limit fraud
Bank customers who pay cheques from rival lenders into their accounts will be able to get the money cleared within one working day. FILE PHOTO | SHUTTERSTOCK
African Alliance Investment bank will start depositing money directly into customers’ bank accounts in a bid to curb fraudulent cashing of clients’ cheques, the firm has said.
In a notice sent to investors on Monday, African Alliance said it will soon start remitting money on customers’ sales orders via the electronic platform that is relatively more secure compared to cheque-based transactions.
“We have implemented a number of additional controls to safeguard the interests of our clients. The most notable of these is a move to make client payments through electronic funds transfers rather than by issuing cheques,” read part of the notice.
“This we have done in a bid to curb fraudulent activity.” In real time gross settlement (RTGS) transactions, the money is wired electronically to a client’s bank account directly, eliminating risks in cheque payments where details may be changed along the way.
By law, all payments exceeding Sh1 million are supposed to be made using RTGS. The usage of cheques is, however, common for smaller transactions among retail investors.
Investors have lost millions of shillings to fraudsters who collude with unscrupulous employees of stock brokerage firms.
In the latest instance of rampant fraud, a client of Dyer & Blair lost Sh10 million recently and the investment bank fired 11 employees in the fraud purge last month.
The money was transferred from the client’s account without her knowledge.
The rampant fraud has dented confidence in the capital markets, especially among retail investors.
This has seen the firms tighten their internal controls to minimise losses and protect their reputation in the market.
While RTGS appears more secure, investment bankers say its high costs remain the biggest hurdle to its full implementation.
“RTGS is expensive since each transaction costs Sh400. We are using it for amounts lower than Sh1 million on a discretionary basis,” said James Wangunyu, the chief executive of Standard Investment Bank.
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