A judge has backed the dismissal of two former bank employees caught in separate fraud schemes that saw two lenders lose a combined Sh36.64 million, underscoring the growing insider risks facing financial institutions.
Court proceedings revealed how I&M Bank and SBM Bank Kenya Limited lost Sh27.14 million and Sh9.5 million respectively through schemes by insider employees. Two former employees dismissed over the fraud schemes sued the lenders.
In the case of I&M Bank, insiders at the lender's Kisii branch carted away cash in October 2018 in a fraudulent scheme that involved stacking bundles of lower denomination notes in safes disguised as Sh1,000 notes.
Proceedings at the Employment and Labour Relations Court revealed that the fraud was uncovered after a surprise cash count at the I&M Bank Kisii branch vault revealed a shortfall of Sh27,144,000.
The cash count revealed that Sh100 notes were hidden in Sh1,000 notes and sealed in bundles of thousands to be counted as Sh1,000 notes.
An internal audit report confirmed that I&M Bank recorded a cash vault difference of Sh25,490,730, an ATM cash difference of Sh1,654,200 and a Mobicash float difference of Sh3,100,000.
The bank's security department confirmed a vault difference of Sh25,495,270 and an ATM cash difference of Sh1,654,200, totalling Sh27,144,930.
“The Sh29 million turned out to be Sh3 million. There was an audit carried out, confirming the loss of money,” Judge James Riika said as he found Daniel Ochieng’ Okweh, a former operations manager at I&M Bank’s Kisii branch, culpable for the cash loss.
Mr Okweh was suspended from work on October 25, 2018, and placed on half his salary over the fraud. He was later summarily dismissed on January 31, 2019, sparking a legal battle as he claimed that he was never given a fair disciplinary hearing and demanded compensation.
Justice Riika, however, dismissed Mr Okweh's claims of unfair dismissal, saying his defence was heard alongside those of his former colleagues implicated in the cash loss, including Tom Adinda, the cashier, and cashiers John Omaiko and Dennis Kioko.
“The claimant did not complain at the hearing, that he was subjected to an ad hoc committee. He confirmed to the committee that he was aware of why he had been called to Nairobi. He was thankful for the opportunity accorded to him, to defend himself. Questions were put to him by the committee, which he responded to, one after the other,” the judge said.
“The committee made findings and recommended that the claimant and his colleagues be dismissed with immediate effect,” Justice Riika added.
On the part of SBM Bank, officials discovered an internal fraud on the lender's Mfukoni Mobile Banking application in July 2020, resulting in a loss of Sh9.5 million.
Court proceedings revealed that an IT officer at the bank, Melvin Wairimu Njoroge, left her computer unlocked and remotely connected at night and during her absence; malware scripts and files used to perpetrate the fraud were created on the bank's computer on June 8, 2020.
She allowed transaction monitoring staff to enter their credentials on her computer, which allowed the malware to obtain user credentials. The users' credentials were taken by the hackers. It was not just her computer that was used. In total, seven computers were infected, according to the forensic report.
“The claimant (Ms Njoroge) was shown through CCTV (closed-circuit television), to have left her computer unattended. It was accessed by one Baskar. Her computer was infected with malware. The IT supervisor Baskar’s credentials were compromised through the claimant’s infected computer,” Justice Riika said as he found Ms Njoroge culpable of the fraud scheme.
“The claimant was not scheduled to be at work on July 12, 2020. She had made arrangements for Denis Manyeki (a member of the Mfukoni app team) to relieve her but overstayed in office, and engaged Baskar. She claimed she engaged him to sort out downtime, which had been occasioned by power failure. There was no persuasion in this evidence,” the judge said.
Court filings showed that SBM Bank lost money in three tranches of Sh5.1 million, Sh1.6 million and Sh2.8 million, totalling Sh9.5 million.
“Although some of the incidents took place in the absence of the claimant (Ms Njoroge), it is noted that the malware opening the respondent’s (SBM Bank) systems to fraudsters was introduced on June 8, 2020 while the claimant was still at work,” Justice Riika said.
The judge said that evidence showed that Ms Njoroge had links with suspects who operated an account through which the stolen money was siphoned off.
“The claimant’s handling of her computer, and her association with characters who were either the wheels, or cogs within the wheels, of the massive cybercrime perpetrated against the bank, cast her in the light of an insider participant in the fraud” the judge said.
“It was especially incriminating that she was associated with characters who were not bank staff, and who were implicated in the fraud. She was cast as an insider, assisting fellow insiders and outsiders to rob her bank using a computer,” Justice Riika added.
