Promoting Good Governance.

Banks Ignore CBN Whistle Blowing Directive

Many banks in Nigeria have failed to fully comply with a Central Bank of Nigeria, CBN, directive for financial institutions to introduce customer care and whistle blowing mechanisms in their operations, an investigation by icirnigeria.org has revealed.

Although a good number of financial institutions have complied, several big banks have failed to do so months after the directive was issued.

Tagged the Code of Corporate Governance for Banks in Nigeria Post Consolidation,the directive  requires Nigerian banks to implement whistle blowing procedures in their operations as a means of preventing, detecting and combating cases of fraud.

The Code specifically requires that “Banks should establish whistle blowing procedures that encourage (including by assurance of confidentiality) all stakeholders (staff, customers, suppliers, applicants etc) to report any unethical activity/breach of the corporate governance code using, among others, through a special e-mail or hotline to both the bank and the CBN.

By the CBN directive, every financial institution operating in Nigeria is required to establish a platform through which stakeholders, customers and staff alike, would be able to give information on cases of fraud, misconduct and breaches of banking ethics in the affected bank and the CBN.

There are several ways of complying with the directive. One, which was actually suggested and agreed to by the Bankers Committee, is the creation of a whistle blowing platform on the banks’ website.

Others are creating a consumer desk in bank branches, providing a dedicated complaints hotline and an e-mail feedback mechanism.

However, our investigations show that many banks have not complied. In a bid to measure the level of compliance by banks, icirnigeria.org visited the websites of many banks and found out that quite a number of them have not complied with the directive.

While others have made attempts to at least establish online customer care platforms, others, particularly older generation banks, have not created any means by which customers can blow the whistle on fraud and other financial malpractices.

It was observed that those who have taken the CBN directive seriously are mostly second generation banks. These include Guaranty Trust Bank, GTB, First City Monument Bank, FCMB, United Bank for Africa, UBA, Diamond Bank, Sterling Bank, Keystone Bank, Unity Bank and Oceanic Banks.

Mainstreet Bank is still in the process of constructing its website while Enterprise Bank is still upgrading its own.

Other banks do not have direct whistle blowing platforms but have other customer care mechanisms that allow customers to lodge complaints or raise alarms on fraud.

These include dedicated e-mails and hotlines for feedback and complaints. Standard Chartered Bank and IBTC are in this category.

The first generation banks, particularly First Bank and Union Bank, do not have any kind of whistle blowing links on their websites. Interestingly, some new generation banks like Eco Bank and Zenith Bank too have not developed any whistle blowing platforms on their websites.

Thus, customers and even staff of the bank who want to alert the management to fraud do not have any means of doing so incognito without physically having to go to the bank and disclosing their identities.

On the First Bank website, for example, there is no whistle blowing platform or customer feedback mechanism dedicated to blowing the whistle on fraud.

When icirnigeria.org called the media department of the bank, an official of the unit who gave his name as Remi said that the bank has a customer feedback section on its website dedicated to complaints.

“If you go to First Contact on our website, you will see that it has dedicated lines which serve customers 24 hours,’ he said

However, a visit to First Contact on the First Bank website showed that the bank either does not understand the requirements of the CBN directive or has ignored it.

First Contact is merely for general enquiries, requests and complaints about accounts held in the bank and has nothing to do with enabling customers report fraud confidentially.

Like First Bank, Union Bank, another first generation bank, does not have any whistle blowing platform on its website.

Its customer service section only provides security tips to account holders on safeguarding their account or provides hotlines strictly for account management related issues. None of the hotlines have anything to do with complaining or giving information about fraud in the bank.

With other banks, there is only an appearance of compliance. For example, Sky Bank has a whistle blowing platform tucked obscurely in a customer services section on its website but the link is inoperable and takes an enquirer nowhere. Perhaps it is still developing its whistle blowing platform.

On the other hand, however, several banks have embraced the CBN whistle blower directive as a veritable means of guiding against fraud. One such bank is Unity Bank.

In response to the CBN directive, Unity Bank through a memo to its staffers elaborated on the reasons for the instruction thus, “Whistle-blowing involves the reporting of incidents of misconduct involving or affecting an organisation to enable the organisation to take appropriate action. It is a window to obtain feedback on issues bordering on both corporate governance as well as reputational risk related issues escalated to the highest levels of the Bank.”

According to the document signed by Bilkisu Umar, head, regulatory compliance department and Ahmed Yusuf, acting executive director, risk management and control of the bank, “An effective whistle-blowing programme is regarded as a key element ofgood corporate governance and good fraud risk management. ”

The statement further clarified, “A key feature of an effective whistle-blowing programme is the ability of whistle-blowers to report incidents anonymously and/or confidentially, if they so desire.”

Unity Bank has one of the most standard customer complaint platforms with live help, whistle blowing, and customer care and helpline links.

FCMB too has one of the most practical platforms to check fraud related issues. The bank’s website has a platform providing customers links on online, mobile and telephone fraud.

This is apart from its whistle blower, card fraud and cheque fraud links. These are separate platforms for lodging peculiar complaints that could be promptly treated depending on the nature of the fraud committed.

Each section has its peculiarity. For instance, the online fraud link is designed to alert customers on the inherent risks of disclosing confidential information on scam websites and provide corresponding e-mail to report such cases.

The bank also has whistle blower platform, uniquely contracted out to KPMG Ethics Line to be independently operated by KPMG Professional Services. This platform is accessible through a hotline, fax or e-mail and information can be given anonymously to ensure confidentiality.

Information about what happened, when the act occurred, where the act occurred, who was involved in the act and any other useful information would be required from an individual who lodges a complaint.

However, for banks that do not have whistle blowing platforms but provide e mail feedback links, efforts to put these e-mails to use became a mirage.

None of the messages sent to any of the banks were replied. Except for First Bank and Fidelity Bank which sent computer generated auto response as replies, replies are still being awaited to enquiries made to the banks.

For example, an e-mail sent to IBTC has remained unanswered. But a call to 01 – 2717739, the hotline for reporting fraud provided on the banks website was answered by a female voice.

She explained that callers who want to report fraud would have to provide details of the fraud including type, names of offenders and how it was perpetrated.

For those who have complied in one way or the other, noticeable is the confidentiality with which the whistle blowing or fraud reporting can be conducted. Many of the banks do not request for complainants to provide personal data before lodging a complaint.

For example, the female voice on the IBTC fraud reporting hotline said that callers are not required to provide their names or other personal details although a phone number might be required in case the bank wants more information from them.

This should embolden petitioners to make anonymous complaints without revealing identities or location and remove the fear of possible backlash.

Even then, some customers still have some fears about the efficacy of the whistle blowing platform achieving desired goals. Suleiman Adamu, a civil servant resident in Abuja opined that beyond having the customer feedback mechanisms, the banks must be very responsive for them to be effective.

“If complaints by customers or even insiders within the banks are not promptly attended to, some of them that might require very fast intervention by the banks to checkmate an action, then the policy cannot achieve results,” he said

However, Oge, a lady in the corporate affairs unit of GTB confided that not only has feedback to the bank’s whistle blowing platform been very good, it has actually served in detecting and preventing fraud.

Oge said that the bank’s whistle blowing platform is structured to be very responsive so that complaints and alerts about fraud are dealt with almost immediately.

The bank, she said, also has a whistle blowing platform on its internal staff Internet website where members of staff can also give information on possible fraud and related matters without disclosing their identity.

In reacting to the fears and issues raised about the CBN directive, particularly the requirements of a whistle blowing platform, Abubakar Mohammed, head of corporate affairs at the apex bank,said that the customer care policy is meant to protect both customers and the banks from fraud.

Observing that it was actually the banking committee that decided on adopting a whistle blowing platform on the websites of banks, he assured that feedback from financial institutions show that ”they are working on perfecting the system”.

According to Mohammed, the directive is meant to provide an early warning system and an opportunity for banking transactions to be conducted with transparency, adding that the regulatory bank was closely monitoring compliance to the directive.

He said that the issue of any banks saying it does not need or want such a platform does not arise because the management of the financial institutions were all part of the decision to create such a platform.

Mohammed stated that for those who have not complied, they must be working on it, reasoning that as an issue that involves application of technology, it might involve server upgrade or even getting new servers and so on.

“Some of them have servers that are already loaded, some might have to upgrade, create space or increase capacity of their server. But we know they are working on it. It is an ICT issue and that takes time.” he said.

A source at the CBN also told icirnigeria.org that the apex bank might create a department for consumer protection to deal with issues of consumer complaints and related matters.

The issue of bank fraud has become rather worrisome in the last few years. In the last couple of years several bank managing directors have come under scrutiny and many have been found to have dipped their hands in depositors’ funds.

Many are even now being prosecuted for fraud and corruption related offences.

Following the crisis that rocked the banking industry largely as a result of mismanagement of financial institutions in the country, the CBN had to inject N620 billionn into the sector and replace the leadership at eight Nigerian banks to calm the system and return confidence to banking industry.

The replacement of the bank executives were fallout of the discoveries of sharp practices, misconducts and mismanagement of billions of depositors’ funds domiciled in the affected banks.

The CBN dragged some of them before the Economic and Financial Crimes Commission, EFCC, which has commenced the prosecution of many of them.

Conviction was secured against Cecilia Ibru, the former chief executive of the now defunct Oceanic Bank, for misappropriating the sum of N191 billion of the banks depositors’ fund.

Erastus Akingbola, former chief executive officer of Intercontinental Bank, now merged with Access Bank, is also standing trial for allegedly stealing billions of depositors’ funds from his bank.

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