Circumventing identity-related risks in the banking sector

Imagine an individual walking into a bank with a stolen cheque, seeking to open an account using the names on the cheque. Or this ‘customer’ presents a passport to withdraw money, only for the teller to establish that the details do not match what the account in question suggests. Those in the banking sector are better placed to give many more similar stories relating to forgeries and fraud. Some of the most common types of economic crimes committed by perpetrators include credit card fraud, identity theft and forgery. Kenya's Banking Fraud Investigation Unit (BFIU) exists to receive and investigate fraud complaints from commercial banks and other institutions, advise banks on fraud prevention and detection strategies; and sensitise the public on common types of fraud as well as to liaise with other agencies to fight fraud and recover stolen money and restitute the amounts to the rightful owners. Banks are expected to liaise with the BFIU even as they have the capacity to detect and mitigate many of these risks themselves. The banking sector remains a pillar in the development of the country. Individuals and companies alike rely on the banking sector to conduct crucial financial transactions. Given this critical role, banks have every reason to take risk management very seriously. Identity documents are used as feeder documents to onboard a client and to identify a customer before transacting. When one presents a national identity card and/or a passport to identify themselves, a bank official makes a comparison between the details in the bank’s database and the person and documents before them and uses that comparison to make decisions. The use of identity documents (and lately, biometric recognition) presents risks that need to be considered and prepared for. For instance, a document forgery could portend millions of shillings in losses to the institution. A case of identity theft could cost the bank significant money and lead to serious reputational damage. Document fraudsters have access to many identity-related schemes such as bio-data alterations, identity fraud, fraudulently obtained genuine documents, use of fantasy and camouflage documents or the use of complete counterfeit documents. It is important therefore that banks and other financial institutions put in place strategies that mitigate against these risks. Two related strategies can help circumvent identity theft related risks. First, the banking sector should invest in efforts to build the capacity of its staff. Capacity building could involve workshops and training aimed at better equipping the bank’s staff to identify instances of potential fraud. Certain training can empower staff to conduct an effective document check and since fraudsters are always a step ahead, refresher courses need to be part of the bank’s training schedule.