Local banks need to improve their operational risk to anti-money laundering and combat the financing of terrorism activities. According to the Bank of Botswana (BoB) 2013 annual report, Banking Supervision report, site examinations carried out at two banks in 2013 revealed that both banks’ operational risk and anti-money laundering and combating the financing terrorism activities needed improvement.
The report indicates that one bank had a number of branch managers and other vacant key positions at branch level filled on temporary basis across the branch network. And the positions even included the risk director and head of operational risk. “Staff shared codes for accessing restricted areas,” the report stated adding that there was also non-adherence to the two-week mandatory leave. “This resulted in compromised segregation of duties, a weakened control environment and increased absence from work.” On operational risk and anti-money laundering and combating the financing terrorism issues one bank is said to have compromised account opening procedures by delaying capturing of account opening information until end of business day.
“This compromised the accuracy and completeness of records as well as the need for enhanced due diligence on high risk customers.” The other bank did not have a properly structured training programme for new and existing staff and relied heavily on arbitrary on-the-job training. “Junior staff interacting with customers were found to be inadequately trained and lacked knowledge on basic banking matters.” The bank staff were not adequately trained on the operational risk and anti-money laundering and combating the financing terrorism activities issues.
“Staff interview at the bank’s branches were not sufficiently conversant with the issues.” On Information Technology (IT) and infrastructure issues one bank’s IT system operated on a standalone basis resulting in high levels of manual intervention, which posed data integrity risk, human error and fraud. The other bank was reported not to have a disaster recovery site and therefore business continuity could be hampered in the event of disaster. “In addition the other bank’s server and associated data bank and testing were located and maintained outside Botswana.” BoB has since advised the bank to open up a server in Botswana in case there is a catastrophic disaster in the foreign country where the server is located. Further the BoB noted incidences of fraud at one bank between June 2012 and September 2013.
The reports involved internal and external fraud related to a customer withdrawing funds against uncleared cheques, which were later, dishonored. It was also noted that the bank’s loan application requirements had some lapses, which resulted in some customers presenting falsified copies of salary information slips so as to qualify for higher loans. “The examined banks were directed to address all issues of supervisory concern promptly within specified timelines”.