The N40 Billion First Bank Fraud And Failures By Internal Control And Inspection Units

 

When the previous CEO of FirstBank resigned like a janitor (you come to work, and resign the same day) without the months-long notice we expect from bank leaders, I wrote that something was wrong: “I just hope it is well with him and his family as bank leaders do not resign like janitors with no notice! But if it is for another career opportunity, good luck to him.”

And when they replaced him with a risk leader, I posited that something bad happened: “That said, we can extrapolate that it is possible that the last CEO left due to risk/compliance related matters; I had expressed my shock that he resigned like a janitor, since you do not expect bank chiefs to come to work, resign, and stop work that same day.”

Today, we are hearing that one demon operated for two years and cleared N44 billion: “First Bank, Nigeria’s oldest bank, has suffered a massive fraud thought to be worth as much as N40 billion after an employee at a Lagos branch allegedly diverted funds in a scheme that went undetected for almost two years,” TechCabal reports.

This is just unfortunate for a bank which is known for excellence. 

This fraudster possibly bought lunches for internal control (ICU) and inspection units of the bank which prevented them from matching mandates with value over time. Typically, at the end of a banking day, the IT unit will generate End of Day reports, and the ICU and Inspection unit are to use those reports to reconcile postings on the bank’s general ledger with instructions from customers (paper or digital). Those reversals would have been picked as non-factual since there were no customer transaction instructions to start with.

Very strange that FirstBank could fall to this type of fraud. As an entry level IT staff in Diamond Bank, we used to work in the night to print those reports, and first thing in the morning, courier companies would pick the reports, to distribute to all branches for their control teams to reconcile. It was a simple ICU work: this entry, where is the customer instruction, and if that does not exist, raise a flag.

They should also check FirstBank books. If you lose N40 billion, the End of Month and End of Year reports would not have balanced in the general ledger. In other words, somebody was posting entries in the general ledger to avoid those deviations showing up in those reports. This is where the systems automation unit or whatever it is called (the core unit in banks that can post in the general ledger via the backend) becomes important.