A First National Bank Botswana whistleblower’s report reveals how some senior managers at the bank are allegedly involved in massive fraud in which false documents are used to buy estates of deceased customers as well as fixing property prices.
The sensitive and explosive report has been filed alongside court papers before the Francistown Industrial Court by a whistleblower (names withheld) who is a former Credit Manager at the FNB’s investment arm, Rand Merchant Botswana.
The court papers show that the report was filed with First Rand Ethics Hotline/Contact Centre on 16 December 2016.
By her own account, the whistleblower states that she did not respond to the vacancy but was head hunted for this role by several members of the FNBB senior and executive team members. She revealed that as she got accustomed to the work and various systems and software in use, she observed breaches in the application of the prescribed credit policy.
“In particular, this involved the Head of Sales (names withheld) and Sales Manager (names withheld) as well as members of the sanctioning team distributing and approving either fraudulent, illegal applications or applications that were in contravention of the credit policy,” she said.
She stated that “I have also come across instances the sale of property of deceased estate or financing against assets held in Trust, where the applicant maybe related to but is not the beneficiary of that trust.”
“Fake or falsified documents have been used in an application of that Trust. Such as in the case of Director of FNBB Business (names withheld),” she said.
Some of the issues that the whistleblower said are rampant include among others irresponsible lending practices where the source of repayment and legal right to the assets are neither verified nor linked; but financing is provided by the bank.
“Cases include company applications, where financing is given to Director/Shareholder, but affordability is determined by the company; however in order to justify appropriating legal title to the Director, a falsified pay slip will be produced where income tax is not even provided or does not have corresponding tax clearance certificate. In these instances the practice is that the company does not reflect the liability on its books,” she said.
She states that the existing credit policy of the bank does not allow for lending to companies where commercial risk is demonstrated.
“The policy explicitly only allows for the financing of non-regular salaried individuals who are sole/major owner of the business; where legal and operating risk cannot be separated from the owner and the business; in such cases of partnerships and sole-prop structures i.e. doctors lawyers etc not companies that demonstrated commercial risk,” she said.
She added that “The risk here is that these applications were not subjected to varied commercial risk assessment and mitigation that should ordinarily take place. This has perpetuated poor lending and monitoring practices and has contributed notably to the increasing non-performing loans (NPLs).”
The whistleblower states further that she also came across instances where a company seeking a loan is unable to produce minimum required track record of operation of two years; affordability is based on falsified/fake or incomplete tender contract.
In some instances, the report states, falsified identification documents or inadequate statutory documents (such as inconsistence/missing share certificates) are presented.
She also took issue with the purchase of tribal land by foreign national, which she said is in contravention with national legislature.
Of particular concern also include, the report says “Financing of staff members outside accepted threshold of 60 percent of debt to annual income earned. An example is Human Resources Director (names withheld), who is at 90 percent debt income ratio.”
Other alleged irregularities which are of concern to the whistleblower include financing of foreign nationals and scheme clients outside the prescribed thresholds.
She also stated that she noticed inappropriate use/application of insurance product in favour of ineligible clients.
“Instances where certain members of the division engaged external valuer in order to manipulate property valuation on behalf of clients. This is further compromised by fact that there is now an internal valuer who is able to change or endorse final pricing of property, without having to send to First Rand for moderation as was the case before,” reads the report.
The report further states that there is negation of preferential pricing between client and head of sales without involvement of credit or after approval of the pricing.
“Typically this pricing will be well outside the expected threshold. Although it must be noted that the negotiation of pricing is well within the purview of the Head of Sales, the policy requires that in such instances this must have a clear business motivation and carried in conjunction with the head of credit. This was not done in some instances,” says the report.
Responding to Sunday Standard enquiries, FNBB Director of Marketing and Communications, Obonye Malope said “…the Bank has processes in place to monitor adherence to its policies, including acting on Anonymous Tip Offs. Any concerns raised regarding deviations from policy are investigated and appropriate action taken. The alleged irregularities are unfounded.”
For its part, Deloitte Tip-offs Anonymous, whose address the whistleblower sent the report to told Sunday Standard that “We are an independent whistle blowing hotline service provider to FirstRand Limited. This facility is used to report fraud and irregularities within the organisation. Kindly contact the organisation directly with regards to your enquiry.”
First Rand Bank headquarters in South Africa had not responded to Sunday Standard enquires at the time of going to press.
Jimmy Ndaba of Ndaba Associates who is representing the whistleblower declined to comment on the matter saying it is before court and wanted to know how Sunday Standard got hold of the papers.