- Experts warn of unprecedented repercussions of financial fraud
The financial sector which is considered to be the blood vessel of economy faces unprecedented combined threats of fraud and cyber-attacks a trend in which experts say will spark grave ramification if not dealt with properly.
Over the years, financial fraud and cyber-attack on financial institutions even individuals has become common across all hemispheres. And, nations continue to grapple with the rising problem of financial crimes. The rapid transition to digitalization even makes the sector vulnerable to wide range of old and emerging threats.
Fraud, money laundering and online thefts have been causing havoc on the financial sector even in New York, world’s leading business centre. Months ago, co-founder of the failed crypto exchange FTX, Sam Bankman-Fried was found guilty of cheating investors and consumers of his now-bankrupt company and was sentenced to 25 years in prison. He was charged with wire fraud and conspiracy to commit money laundering last year.
The problem demonstrates the rise in finance-related crimes. Hackers and criminals usually view banks as prime targets of thefts and fraud. The trend is worse in countries with insufficient technology and human powers to combat crimes.
According to source, in current Ethiopia’s fiscal year a large number of financial-related crimes have been reported and are being investigated, with billions of birr seized and under investigation.
In Ethiopia, from 2014 up until 2015 E.C. banks have lost one billion Birr due to fake documents and other fraudulent activities.
The country has foiled over 4,550 cyber-attacks in the first six months of the current Ethiopian fiscal year. The attack increased by 115 per cent compared to last year. According to INSA, the country could have lost 186 million USD has the attacked succeeded.
In addition to fraudulent acts, the digitalization of the sector also results in system failure which sometimes appears to disrupt the macro-economy.
In the recent past, a system glitch that occurred in the country’s biggest bank CBE led to the loss of Billions of Ethiopian Birr. Though the bank was able to retrieve the stolen money using different means, the incident speaks volume about the increasing barriers facing this critical sector.
Michel Habte is Chief Operating Officer at the Ethiopian Securities Exchange. In an exclusive interview with The Ethiopian Herald, Michel acknowledged that glitches may happen in the most advanced countries banks, and the key is to have an operational risk framework in place to cope with these challenges. “We cannot 100 per cent prevent every glitch, but having protocols and procedures in place is crucial.”
Regarding the country’s financial security, Michel stated that Ethiopia is advancing in financial security and has a very strong national security agency, INSA. However, the vulnerability of the financial sector is increasing due to the use of fake documents and other fraud systems.
If the financial system is not stable, it will put pressure on the country’s economy and create political instability, said Financial Intelligence Service Public Relations and Communications Executive Officer, Endale Assefa.
There are financial crimes involving the use of forged documents and business licenses to make illicit profits. The extent of the damage these crimes cause is very hard and proves difficult to prevent as criminals usually try to launder the money and give it legal status.
Endale further explained that financial fraud damages the reputation of financial institutions, erodes the credibility they have with their customers, and disrupts their relationship with other international financial institutions, leading to punishment for the financial institutions.
Endale stated that the Financial Intelligence Service works together with the financial institutions recognized by the National Bank of Ethiopia and other relevant stakeholders to prevent and control these complex crimes, which are often committed with the help of experts.
Users’ limited knowledge as to how to use online financial services also become advantageous for criminals. Michel emphasized people need to understand the risks associated with their data and how to use financial services in a safe manner.
He stressed the importance of collaboration between the government, relevant agencies, banks, financial sector players, and the providers of these services to educate the population on how to use these platforms and services safely.
BY EYUEL KIFLU
THE ETHIOPIAN HERALD THURSDAY 30 MAY 2024
