Banking sector urged to adopt advanced measures against fraud

Financial institutions are being called upon to implement a range of sophisticated measures to combat increasingly complex fraud schemes.

The recommendations, outlined in the Ghana Association of Bankers (GAB) analysis of the Bank of Ghana’s (BoG) 2023 fraud report, include adoption of advanced data analytics; implementation of zero-trust security frameworks; and the use of blockchain technology for enhanced transaction transparency.

These proposals come in response to a challenging year for the country’s banking sector, which saw a paradoxical decrease in fraud attempts but an increase in financial losses.

The analysis emphasises need for a multi-faceted approach to fraud prevention, combining technological solutions with improved human resource practices and customer education.

Chief among these is the use of advanced data analytics for fraud detection.

“Banks should invest in artificial intelligence and machine learning tools to proactively detect and prevent fraud. These tools can identify patterns in transactions that indicate fraudulent activity even before it occurs,” the bankers’ association stated.

Notably, the recommendations extend beyond purely technical solutions. The analysis suggests enhanced staff-vetting and ethical training, as well as improvements in employee welfare.

This human-centric approach acknowledges the potential impact of economic hardship on fraudulent behaviour, with the analysis noting: “Given the challenging economic environment and sharp rise in the cost of living over the past two years, financial hardship can significantly influence employee-behaviour and ethical standards”.

The recommendations come against a backdrop of alarming fraud statistics. The report reveals a total of 15,865 fraud cases across the sector in 2023, marking a 4.6 percent increase from the previous year. Despite this modest rise in incidents, the financial impact has been substantial – with losses amounting to approximately GH¢88million.

Perhaps most striking is the shift in distribution of fraud cases. Payment Service Providers (PSPs), which include mobile money and other digital payment platforms, accounted for an overwhelming 92.37 percent of all reported incidents.

This figure, analysts say, underscores the growing vulnerability of digital financial services; a sector that has seen rapid expansion in recent years.

The banking sector, while reporting fewer incidents, faced its own set of challenges. Despite a 59 percent drop in attempted fraud cases, banks and Specialised Deposit-Taking Institutions (SDIs) saw a 29 percent increase in total loss value – reaching GH¢72million in 2023. This discrepancy points to a troubling increase in the effectiveness of fraudulent activities.

Cash theft, particularly through suppression, emerged as a significant concern. “Cash Theft (Cash Suppression) accounted for the largest losses, totalling GH¢14.8million – a staggering 14-fold jump from the GH¢1million recorded in 2022,” BoG noted.

The rise of new fraud typologies is another key finding. ATM/POS/Card fraud saw a significant surge, with 218 cases reported in 2023 compared to just 9 in the previous year. Additionally, the emergence of SIM-swap fraud as a new threat signals the need for enhanced security measures in mobile banking services.

Perhaps most concerning is the increased involvement of bank staff in fraudulent activities. The report notes a 46 percent surge in fraud cases involving employees in banks and SDIs, rising from 188 in 2022 to 274 in 2023. This trend raises serious questions about internal controls and the integrity of financial institution employees.

In response to these challenges, the BoG has issued a series of directives aimed at strengthening the sector’s resilience against fraud. For banks and SDIs these include strengthening security protocols for account access and transactions, and intensifying fraud sensitisation for customers.

PSPs are mandated to comply with the Payment Systems and Services Act 2019, particularly regarding SIM-swaps, and to implement robust financial fraud programmes.

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