Ecobank Kenya lost millions of dollars between 2020 and 2022 due to critical weaknesses in its card operations department, exposing the bank to internal and external fraud. An internal report seen by TechCabal, prepared by a task force in 2023, outlined the operational flaws that left the bank vulnerable, specifically detailing how merchants and employees exploited gaps in the system.
The report revealed that a total of $43.4 million (KES5.6 billion) was erroneously posted in the bank’s system, and an additional $162,346 was rejected by payment service providers like Mastercard. Moreover, $232,464 worth of chargebacks remained unclaimed due to administrative errors. These issues were further exacerbated by poor oversight and lack of proper technology, leading to the failure of Ecobank’s internal control mechanisms.
One of the most alarming findings was a $2.1 million discrepancy in the bank’s general ledger (GL), which remained unsupported by any documentation. Originally, this balance had been as high as $15 million by July 2022, indicating a gradual reduction that still lacked clarity on its origin.
The root cause of these operational failures included poor adherence to protocols and inadequate training for staff handling transactions. For instance, multiple manual entries into the merchant acquiring GL went unverified, leading to the duplication of 11 entries worth $16.2 million (KES2.1 billion). Between July and December 2021, daily merchant GL debits amounted to $34.8 million (KES4.5 billion) without matching credits.
Additional lapses included untimely uploading of transaction source documents. In some cases, transactions from as early as March 2022, valued at $11.6 million (KES1.5 billion), were not uploaded until June and early July of that year. These delays hindered the reconciliation process and left the bank unable to determine payable amounts to merchants and commissions owed from the schemes.
One of the central problems highlighted was the failure of the maker-checker process, a crucial control mechanism designed to prevent unauthorized transactions. The report concluded that Ecobank Kenya’s weak chargeback monitoring and inability to flag discrepancies in a timely manner further amplified the financial damage.
While the exact financial impact of the fraud remains undisclosed, the task force’s findings raise concerns about the bank’s internal controls and its ability to safeguard against similar incidents in the future.
Ecobank Kenya has not yet responded publicly to the report, and it’s unclear what corrective actions the bank will take to address the issues exposed in the investigation.
This situation sheds light on a broader trend of operational vulnerabilities within financial institutions, where poor internal controls and oversight can lead to significant losses, as seen in the FITC’s recent report on fraud within Nigeria’s banking sector.