Some 758 fresh cases of fraud and forgery, involving at least Rs 1.4 billion, have been unearthed in the banking system during the quarter ended September 2009, Business Recorder learnt Wednesday. Sources in the banking industry said fraud and forgery cases in banks are rising gradually due to weak internal control, which is posing a serious risk to the banking system and with current surge, some 5800 case of fraud and forgery worth over Rs 8 billion are pending.
According to the State Bank of Pakistan statistics, some 10 percent increase has been witnessed in the fraud and forgery during the quarter ended September 2009 as compared to June 2009. The banking system has reported some 758 fresh cases of fraud and forgery worth Rs 1.395 billion, however it is a matter of concern that some 84 percent amount of the new cases fall in ''Serious Fraud'' category.
During the period some 22 cases of serious fraud cases, involving an amount of Rs 1.166 billion, have been reported, while some 48 cases worth Rs 166 million are fresh cases of medium severity cases and 688 low severity cases, involving Rs 62 million, have been unearthed during the quarter ended September 2009.
Analysis of aggregate data shows that number of fraud and forgery cases decreased, while the outstanding amount has increased. Disaggregated analysis show that most of this increase came from ''Serious Fraud'' cases, with some increase contributed by medium severity cases.
Decrease in number of fraud and forgery cases indicates that several fraud cases settled during the quarter is greater than the number of fresh cases. Increase in outstanding amount indicates settlement of large number of small value cases, while large value cases remain unsettled.
Though it is a matter of concern however, this may have resulted from lengthy investigations and legal proceedings involved in settlement of high value fraud cases. According to the SBP, some 5,801 cases of fraud and forgery are pending till end of September 2009 as compared to 6,167 cases in June 2009. However outstanding amount during the period has gone up by Rs 952 million to Rs 8.137 billion in September 2009 from Rs 7.185 billion in June last year.
Out of overall outstanding amount serious frauds have some 66.8 percent share with Rs 5.433 billion, while medium and low severity cases have a share of 16 percent and 17.3 percent, respectively. Group-wise analysis reveal that majority of fraud and forgery cases, both in terms of number and value are concentrated in Local Private Banks (LPBs). Among the fraud categories, amount-wise LPBs hold major share in ''Serious Fraud'' cases while, ''Low Severity'' cases are concentrated in Specialised Banks (SBs) and LPBs, which is a fair representation of the size of banks.
According to the SBP, banks are in a business of taking risk, therefore, it cannot be eliminated. Greater emphasis should be laid on minimising the level of risk posed by each business line within acceptable risk tolerance level. "The banks'' need to improve their internal controls, particularly to avoid ''Serious Fraud'' cases to minimise their operational losses and additional capital charge for operational risk," the SBP said.
Category-wise outstanding fraud and forgery cases as on September 2009 revealed that specialised banks have 2 worth Rs 32 million serious fraud cases, 12 worth Rs 28 million medium severity cases and 1,442 low severity cases, involving Rs 976 million.
In addition, commercial banks have 163 cases of serious severity, involving an amount of Rs 5.392 billion, besides 410 cases worth Rs 1.270 billion of medium severity and 1775 worth of Rs 294 million of low severity cases. Similarly, local private banks have some 111 serious fraud cases involving some Rs 4.007 billion, some 225 cases of medium and 1508 cases of low severity case by end of September 2009. Public Sector Commercial Banks have 50 serious fraud cased having an amount of Rs 1.353 billion, besides 183 medium and 257 low severity of cases.
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