National Bank says it lost Sh300m to fraudsters

National Bank chief executive Wilfred Musau. FILE PHOTO | NMG
National Bank chief executive Wilfred Musau. FILE PHOTO | NMG 

The National Bank of Kenya (NBK) #ticker:NBK suffered losses estimated at Sh300 million last year orchestrated by fraudulent employees and cybercrime attacks, the lender has disclosed.

It says, in its latest annual report, that “operational losses including fraud losses (were) recorded at 3.0 per cent of total revenue made in 2016.”

The NBK did not respond to our queries on the exact loss in the year attributable to fraud, but the Sh11 billion revenue in the year to December 2016 means it could have taken a hit of up to Sh330 million.

The bank defines operational risks as “potential loss resulting from inadequate or failed internal processes, people, and systems or from external events such as terrorist attacks, flooding etc.”

“The risks are inherent in the ICT systems used by the bank, people relied on to perform certain activities, processes being used and exposure to threats from the external environments where the Bank operates,” reads NBK’s report.

A study by Deloitte shows that the most prevalent forms of financial crime reported in Kenya are cash theft, cheque fraud, plastic money scams, and electronic funds transfer fraud.

The bank did not disclose how much was recovered out of the gross fraud loss, the number of staff implicated, or the disciplinary actions taken.

The Nairobi-bourse listed lender – controlled 48.05 per cent by the National Social Security Fund (NSSF) and 22.5 per cent by the Treasury – said it has hired personnel and deployed technology to arrest fraud.

The NBK now joins Barclays #ticker:BBK and KCB Group #ticker:KCB as the only lenders in Kenya who have broken ranks with peers to publicly reveal banking fraud statistics.

Barclays Bank of Kenya last month revealed that fraud losses more than doubled to Sh145.9 million last year from Sh59 million lost in 2015.

Of the total amount defrauded last year, Barclays said it recovered Sh86.7 million arising from 196 disciplinary cases, adding that the net amount lost to fraudsters was Sh59.2 million involving 122 claims of theft.

Barclays was only able to recover Sh5.5 million in 2015 and suffered a Sh53.7 net loss arising from fraud.

KCB Group, Kenya’s biggest bank by assets, also revealed it sacked 31 employees in 2016 due to fraud and professional negligence, compared to the 33 staff fired in 2015 and about 90 workers in 2014.

However, the regional lender declined to say how much was lost through fraud.