FICO Bank

Fraud Prevention, Detection, and Mangement Oscar M. Maninantan FICOBank 2010 RBAP-MABS National Roundtable Conference 2010 RBAP-MABS National Roundtable Conference Hyatt Hotel and Casino, Manila June 2-3, 2010 Casino, Manila Hyatt Hotel and June 2-3, 2010

Presentation for 2010 RBAP-MABS National Roundtable Conference Topic: Fraud Prevention, Detection and Management Mr. Oscar M. Maninantan Head, Internal Audit Department Hyatt Hotel and Casino, Manila June 2-3, 2010

One of the first 29 cooperative banks organized under a Presidential Decree (PD 175 – Strengthening the Cooperative Movement) as an accompanying measure of the government’s Agrarian Reform Program. The goal was to develop a cooperative banking system owned by farmers to replace the landlord as the traditional source of production credit.

1976 – The bank was established. 1980 – Upon the issuance of BSP license, the bank opened its doors to the general public. 1999 – The bank expand its market by participating in the microfinance program of PCFC. 2001 – The bank signed up with RBAP to adopt the MABS Approach for individual microentrepreneur borrowers. Microfinance Performance as of December 31, 2009. No. of Active Borrowers : 1,328 Loan Outstanding : P 37,822,401.48 No. of Account Officers : 16 No. of Branches Implementing MF Individual Loan : 8 Branches Area of Operation : Region 02

1) Implementation of strict/stringent loan process.  Management created a “Branch Credit Committee” where all loans (regular and micro) are reviewed and deliberated before approval/recommendation. The members are: Branch Manager, Assistant Branch Manager, and Teller/Cashier. 2) Conduct of monthly post release documentation Audit.  Department conducts loan documentation audit on a monthly basis. All released loans (regular and micro) are reviewed. Any exceptions noted are reported to the Credit Committee that meets every month. The CRECOM is composed of 3 members of the BOD, the President, the EVP, Compliance Officer, 2 SVP, Head of the Internal Audit Department and the Branch Managers.  Regular audit that includes review of the loan portfolio of the branch are conducted twice a year. The result of the regular audit is reported to the Audit and Inventory Committee. The AIC is composed of 5 members of the BOD and Compliance Officer which meets every month and reports all major exceptions to the Board of Director. The BOD meeting is on a monthly basis.

 Special Audit is also conducted whenever there are major exceptions noted in the regular audit.  Spot audit is also conducted on a regular basis. 3) Efficient MIS. 4) Introduction of measures as deterrent for committing fraud.  Client visit by supervisors/managers.  Requiring AOs to issue Ors.  Granting incentives to AOs  Strict implementation of Code of Discipline.  AOs not authorized to waive penalties.  Regular rotation of AOs.

1) Regular review of delinquency report.  Supervisor/Managers review delinquency reports and visit/validate accounts with noted missed payments. Any complaints from clients are acted immediately. 2) Field Validation.  Supervisors/Managers conduct validation on loan proposals. Any material discrepancies in the proposal will cause the denial of the loan. 3) Conduct of immediate Special Audit as a result of:  Major exceptions from Regular Audit.  Complaints from clients.  Information from other parties.  Validated information from supervisor/manager.  Complaints of unremitted/unreconciled deposits/loan balances by supervisors/managers are verified and any infractions are reported immediately to COO and Internal Audit Department for proper investigation.

4) Follows bank’s protocol in fraud cases. The Internal Audit Department, immediately, upon receipt of complaint/report of fraud, follow the following procedure: 1) Forms audit team for the special audit. Prepares letter to the Branch/Department. 2) Coordinates with HRAD for the issuance of preventive suspension or transfer order of the personnel concerned.

1) Audit Process: a) Gathering of documents and other needed information.  Gather documentary evidences.  Get details from interviews with clients, witnesses and if possible validate these information from other sources who may have knowledge of the fraud.  If possible get signed statements from witnesses and secure original copies and/or certified photocopies of documents.  The interview should be done in strict confidentiality to protect the reputation of the client and the bank.

b) Preparation of formal report.  Facts in chronological order.  Amount of accountabilities/persons responsible.  Violation of internal control policies.  Weaknesses in the internal control.  Recommendations: - policy issues - administrative accountabilities

c) Submission of report.  The audit report is submitted to the President and the Audit and Inventory Committee of the BOD.  The Audit and Inventory Committee submits recommendations to the BOD.  Under section 7 of the circular no. 410, within thirty (30) calendar days after discovery, the case should be reported to BSP: 1) Any material findings involving fraud or dishonesty (including cases that were resolved during the period of audit); and 2) Any potential losses the aggregate of which amounts to at least one percent (1%) of the capital.

2) Administrative investigation and imposition of sanctions.  BOD approves the recommendations of the Audit and Inventory Committee and refer the case to a special Investigation Committee so that the concerned personnel can be given his/her legal rights to a fair investigation. The Special Investigation Committee after conducting its own investigation will decide on the case and will recommend to the BOD the appropriate sanctions.  BOD approves the sanctions.  HRAD will implement the sanction. 3) As per policy, all fraud cases are strictly confidential. However, Management can always discuss cases to serve as lessons and deterrent to other personnel. 4) The lessons learned from these cases are the basis for strengthening the internal control policies of the bank and instituting new ones if ever there are no existing policies.

http://www.rbapmabs.org	76
http://www.slideshare.net	1
http://translate.googleusercontent.com	1

FICO Bank

by MABSIV on Jun 10, 2010

Accessibility

Categories

Upload Details

Usage Rights

3 Embeds 78

Statistics

FICO Bank — Presentation Transcript