The cheat highway: How banks defraud their customers

Obviously, the hint of being cheated a kobo out of your hard earned money would elicit rage that is literally earsplitting. For you to know that cheating is coming from trusted institutions is equally downright worrisome and heartbreaking.

But the small amounts of money leaving your bank accounts are not all as legal as they seem or you think they are. Services providers, from telcos to ISP companies to banks have deliberately devised means to cream off customers, especially in banks where branches compete among themselves to be profitable.

Though the banking industry is supposed to be the most regulated, officials of banks, are found to deliberately go off the run of play to pinch kobos from customer accounts in various guises.

A business a.m. investigation brings you the five subtle but common ways you may have been unknowingly defrauded by your bank.

Delayed posting of cash deposits:

Have you ever been in a situation where you needed to issue a bank draft for some supplies and your account was not funded to the tune of the draft? Let’s say you have N2 million in your account and you need a draft of N5 million. You then decide to pay in N3 million cash to make the cut for the draft, which you finally did and your draft was issued pronto.

Unknowingly to you, that cash deposit may be delayed for up to 5 days for it to be posted into your account, an action which would make you incur interest charges on a transaction that was ab initio, not a loan transaction. Many banks have gone away with it for years with many customers who, most of the time, do not scrutinize their statements. The interest deductions may amount to little but when it’s taken from many customers, with that kind of transaction, may results to tens of millions of naira as interest income for the banks.

Chequebook charges:

The arbitrary high cost of chequebooks is another area most banks cheat on their customers. Though issuance of checks is on the decline, banks’ branches are creaming off customers by high mark-ups on cheque booklets. Checkbooks are normally printed at the head offices of banks and are sold to profit centres, which are the branches. The branches in their profit drive mark up the charges depending on their locations. business a.m. investigations reveal that branches in high brow areas do as high as 75 percent mark-up on a cheque booklet, which means customers pay far higher than the printing cost of the booklets. If a 50 paged booklet is offered the branches at say at N2,500 most branches could charge customers up to N3,500. That is, the cost of the same cheque booklet within a bank is not uniformed, and is mostly decided by branch heads.

Most customers who spoke to business a.m. say it appears the banks throw the cost of their operational tools at the customers.

The question is why should a customer pay more for the same product because of the location of his or her branch? And why should the banks charge above production cost for what is used to facilitate banking service to their customers?

Unexplained sundry charges: This happens a lot with most customers being debited on transactions they never initiated and when they complained the charges are hardly reversed. Our finding indicated that some bank staff are in the habit of using customer accounts for trading without the consent of the customer and the transactional charges are borne by the customer.

Take the issue of a customer being charged capital gains tax on a savings account that is barely active. A customer said he operates a savings account, which he hardly uses, only for him to find out that N50 charge is monthly debited as capital gains tax. He said he never sold any asset to warrant a capital gains tax.

We all know withdrawing for the fourth time in a month from an ATM machine that is not your banks’ in Nigeria, attracts a charge of N65. This is a policy and by law, it is the right thing. But there is a problem when the machine could not dispense cash and the account is debited. There are several cases of the N65 debit not being reversed when a reversal of the transaction is done. The N65 goes into the bank coffer, while the customer is oftentimes grateful that the transaction amount was refunded.

Customers say the extra charge of N65, which never gets refunded is another way of cheating by the banks especially when appropriate complaints to the bank’s authorities are made.

Card maintenance charges

This one is a strange one and the regulator, the Central Bank of Nigeria (CBN) is mum on it. The idea of maintenance is that something goes wrong and repairs are made or putting efforts to see that something does not go bad. In the case of the debit cards banks charge N50 monthly or N600 yearly, there is often no recourse for the repairs of the cards since they are with the customers. Or are the banks charging the customers for the maintenance of the ATM machines? If so they should say so. But that is equally contestable for customers to pay for their operational tools.

Besides, the pricing of the cards on acquisition is opaque. Customers are just levied the charges without knowing how the price was arrived at, and from records there has never been any complaint from customers, only to be charged again a maintenance fee.

Connivance with bureau de change operators

“This one got me enraged,” says a customer of the tier-1 banks while narrating his ordeal.  He said he needed to travel on a Sunday morning and he approached his bank on Friday morning for BTA/PTA. He asked if his bank had the required amount he needed and the bank answered in the affirmative. He was asked to wait while they seek approval from their head office.

He said he waited patiently until the wee hours of business before he was told the approval did not come at which time he could not approach any of his other banks for this same need.

The situation was really bad but was more hurtful when the staff attending to him informed him that he has a BDC operative who can give the desired cash he needs but at a price that is about N2 different from the original bargain.

The customer said that despite his desperation, he turned down the offer.

These are the little ways banks make margins at the cost of the customer. The scenario meant the branch head and the staff in their desperation to return profit monthly make deals with BDCs to make brokerage fees for their bottom lines or their private pockets.

Statement of account charges

This is a common request from bank customers. A customer may decide that she wants the printed copies from the bank from a certain period to another. Now, depending on the bank, the charges differ per page. Bank customers on many occasions have been wrongly billed due to the request they make. This particular scenario shared by a customer is quite unforgettable. The customer needed a month’s log of transactions made.  The customer approached her bank cashier, the cashier then decides to charge her account with the equivalent amount for pages of all the transactions ever made on that account. This was in hundreds of pages. The customer immediately noticed the huge difference in the request and asked the cashier what happened. The cashier said it was a mistake and that the charges were imputed in error and cannot be reversed. The customer saw reason and kept quiet, patiently waiting for her document. However, when the cashier came with the log of transactions, it was for just one month, as opposed to the lifetime of the account the customer had been charged. Imagine the insolence!

Apart from the above, customers are at the mercies of operational staff of banks who pilfer their accounts for personal enrichment. Little wonder the level of fraud in the system is increasing by the day.

Other miscellaneous crimes perpetrated by bank staffs include fraudulent transfers/withdrawals, cash suppression, unauthorised credits, fraudulent conversion of cheques, diversion of customer deposits, diversion of bank charges, presentation of forged or stolen cheques, among others.

The Nigeria Deposit Insurance Corporation (NDIC), a body concerned with the safe and appropriate use of customer deposits in Nigeria recently revealed that the number of employees of banks operating in Nigeria involved in malpractices in the financial sector increased in 2017 to 320 from 231 in 2016.

Mohammed Kudu Ibrahim, head of communications and public affairs unit of NDIC, lamenting the rise of fraudulent cases in the banking industry said the number of cases rose by 56.3 percent last year to 26,182 from 16,751 recorded in 2016, resulting in the loss of N2.37 billion during the period under review.

Ibrahim said, a planned investigation following the discovery from the corporation’s most recent report on its off-site supervision of the deposit money banks, showed that the number of fraud cases attributed to internal abuse by staff of banks increased 38.53 percent above the figure reported for the previous year.

He said the report relied on a total of 286 responses received from 26 banks during the period under review.

“The 286 responses received from banks in 2017 cited 26,182 cases of fraud and forgeries which is 56.30 percent higher compared to 16,751 cases reported in 2016.

“Similarly, the amount involved in the fraudulent activities documented increased by N3.33 billion from the N8.68 billion reported in 2016 to N12.01 billion in 2017 or 38 percent.

“However, the Expected/Actual loss slightly decreased by N24.42 million, or 1.03 percent from N2.39 billion in 2016, to N2.37 billion in 2017,” Ibrahim said.

On fraudulent activities in the online-banking and ATM/card-related fraud-types, Ibrahim said it constituted 24,266 or 92.68 percent of all the reported cases, resulting in N1.51 billion or 63.66 percent loss in the industry in 2017.

The 22 licensed commercial banks and four merchant banks rendered 286 returns on dismissed/terminated staff as a result of fraud and forgeries in 2017. Out of the 26,182 fraud cases reported by the 26 licensed banks, 320 cases were attributable to internal collaboration by bank staff.

However, the losses arising from the reported cases decreased from N760 million in 2016 to N682 million or about 11.43 percent in 2017.

The pressure in the financing services is high with banks breathing down on staff to drive profit. Especially, business/branch heads are pressured to device means to remain competitive, hence they deliberately do things outside the box to increase their profit and loss (P&L) accounts for either promotion and or recognition.

The only way to curtail these is for customers to be vigilant and cross check all their transactions when they receive their monthly statement and press for reversal if there are any contestable deductions and debits.

* NEXT WEEK: The cheat highway returns with “How customers defraud their banks”