Bank frauds should be checked | Sunday Observer

Bank frauds should be checked

The Law Enforcement Authorities have already contacted the Central Bank of Sri Lanka in connection with the alleged financial fraud at Sampath Bank and their queries were clarified by the Bank Supervision Department (BSD), a Central Bank official said, answering a question on the fraud at Sampath Bank. “Currently investigations are in progress and the matter is before the Court of Law.”

“The BSD of the Central Bank is entrusted with the supervision and regulation of banks to ensure the safety and soundness of the banking sector. Prudential directions and guidelines are issued to banks inter alia directions on corporate governance, risk management and customer charter to protect depositor interest and the stability of the banking sector,” the Central Bank stated in an email response.

Speaking on the same issue, banking sector experts told the Business Observer on Friday, that bank frauds are not unusual in the banking sector in Sri Lanka but what matters to investors and the public is how the banks would take measures to identify the culprits and to prevent its recurrence in the future.

Commenting on a recent media report of a financial fraud at Sampath Bank, some moons back, former Central Bank Deputy Governor, W.A. Wijewardena said Sampath Bank has taken some commendable steps to take the fraudsters to task through a proper investigation.

A senior banker and financial analyst said the fraud committed at Sampath Bank is not the first incident in the country. “There had been several such acts committed at state and private banks in larger amounts than what was siphoned off from Sampath Bank.”

“How could an institution stop two employees committing a fraud in connivance? We must be happy that the bank identified the fraudsters through its internal control systems,” he said.

However, banking sector experts said no institution - be it bank or non-bank could absolve itself from lapses. Financial institutions should strengthen internal control measures and close all technical loopholes for fraud. A report published on a website last week stated that a fraud amounting to millions of rupees had been committed by a manager with the help of a regional manager at Sampath Bank and that the bank had tried to hush the media from publishing the story.

The victims said their cheques and the slip statements were manipulated and balances were added as over drafts. The fraud came to light when their accounts were audited last year.

Releasing a statement in response, the bank stated “the bank is not in a position to disclose information due to ongoing investigations. The incident occurred a few months back and the Bank has already taken appropriate measures to correct the situation and ensure non-recurrence.”

“We wish to assure the public that we have taken steps to ensure that our customers will not be affected in anyway due to the reported incident,” the bank statement said. 

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