Fraud Monitoring Directives No. SBB/59/2014

# NATIONAL BANK OF ETHIOPIA
ADDIS ABABA

## Licensing and Supervision of Banking Business
### Fraud Monitoring
### Directives No. SBB/59/2014

Whereas, the form, causes and impact of fraud inflict actual and potential risk on banks;

Whereas, detection and prevention of fraud contributes to the soundness of financial system in general and banking sector in particular;

Whereas, the National Bank of Ethiopia has found it necessary to require banks to take the necessary measures to detect, prevent and take remedial actions on fraud;

Now, therefore, in accordance with article 59(2) of Banking Business Proclamation No. 592/2008, the National Bank of Ethiopia hereby issues these directives.

### 1. Short Title

These directives may be cited as “**Fraud Monitoring Directives No. SBB/59/2014**”.

### 2. Definitions

For the purpose of these directives, unless the context provides otherwise:

- **2.1** “cases closed” means settlement of fraud cases with police or court, recovering or writing off the amount of the fraud;
- **2.2** “detection of fraud” means discovering that actual or attempted fraud has been taken place;
- **2.3** “director” means any member of the board of directors of a bank by whatever title the person may be referred to;
- **2.4** “employee” means a chief executive officer, a senior executive officer, or any other employee who is appointed or hired by a bank to carry out its day to day operational activities;
- **2.5** “fraud” means an act or omission by shareholders, directors, employees, customers committed with the intention of gaining dishonest or unlawful advantage for the party committing fraud or for other parties;
- **2.6** “National Bank” means the National Bank of Ethiopia.

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### 3. Scope of the Directives

The provisions of these directives shall be applicable to all banks operating in Ethiopia.

### 4. Requirements

- **4.1** A bank shall have a well-defined fraud monitoring and control policies, approved by the Board, and procedures for fraud detection, mitigation and reporting.
- **4.2** Policies and procedures stated under sub-article 4.1 of this article shall be submitted to the National Bank and be appropriately communicated to employees.
- **4.3** A bank shall ensure that the organizational structures and systems are designed to facilitate communication on actual or attempted fraud to the board of directors, management members and other concerned staffs.
- **4.4** A bank shall provide anti-fraud training to all employees and members of the board of directors whenever necessary.
- **4.5** A bank shall maintain fraud register that shall at a minimum contain detailed records of the fraud including:
    - a) name and complete address of the suspected fraudster;
    - b) description or type of fraud (embezzlement, cheating, forgery using fake instruments or others);
    - c) causes of the fraud;
    - d) position or profession of the suspected fraudster (director, employee, customer, or other party);
    - e) amount of actual or estimated fraud;
    - f) date of occurrence of fraud;
    - g) date of detection of fraud and reason for the delay (if any);
    - h) place and area of operation where the fraud has occurred;
    - i) technique and/or technology used to commit the fraud;
    - j) action taken or proposed to be taken to avoid such incidents;
    - k) amount recovered, if any;
    - l) in case of attempted fraud, state reason for the failure of the fraud action; and
    - m) any other relevant information.

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**ADDRESS:** SUDAN STREET P.O.BOX 5550/2048 FAX No. 0115 51 45 88 TEL. NO. 0115 51 74 30 ADDIS ABABA  
**TELEGRAPHIC ADDRESS:** NATIONBANK  
**CODES USED:** PETERSON 3rd & 4th ED BENTLEY'S 2nd PHRASE A.B.C. 6th EDITIO  
**E-mail:** nbe.excd@ethionet.et  
**Website:** www.http://www.nbe.gov.et

የአ.ት.የ.ጽ.ያ በስራራዊ የንሕ
National Bank of Ethiopia

4.6 A bank shall report any attempted or actual fraud to the National Bank within 15 working days from the date of detection of the fraud in the form prescribed under Annex I.

4.7 A bank shall submit quarterly progress report on fraud outstanding to the National Bank within four weeks from the end of the reporting quarter in the form prescribed under Annex II.

4.8 Where no new fraud occurred or progress has not been made on the outstanding fraud cases during the quarter, the bank shall submit to the National Bank a report by putting a word “Same” within four weeks from the end of the quarter.

4.9 The obligation of the bank to report fraud to the National Bank under these directives shall not exempt it from the obligation to report the case to a pertinent authority under any other law.

4.10 Internal auditors shall assess the fraud cases at least once in every quarter and report the findings and status to the board of directors.

5 Sharing Fraud Information

The National Bank, where necessary, may share the fraud information, in its general form and context, guaranteeing the anonymity and confidentiality, to other financial institutions including banks using appropriate means of communication.

6 Effective date

These directives shall enter into force as of the 1st day of January 2015.

TEKLEWOLD ATNAFU
GOVERNOR

3

የአ.ት.የ.ጽ.ያ በስራራዊ የንሕ
National Bank of Ethiopia

Annex I
Actual or Attempted Fraud Cases

Name of bank:  
Date:

| No. | Items | Description | Remark |
|-----|-------|-------------|--------|
| 1. | Name and complete address of the suspected fraudster | | |
| 2. | Description or type of fraud (embezzlement, cheating, forgery using fake instruments or others) | | |
| 3. | Causes of the fraud | | |
| 4. | Status or profession of the suspected fraudster (director, employee, customer, or other party) | | |
| 5. | Amount of actual or estimated fraud | | |
| 6. | Date of occurrence of fraud | | |
| 7. | Date of detection of fraud and reason for the delay to detect (if any) | | |
| 8. | Place and area of operation where the fraud has occurred | | |
| 9. | Technique and/or technology used to commit the fraud | | |
| 10. | Action taken or proposed to be taken to avoid such incidents | | |
| 11. | Amount recovered, if any | | |
| 12. | In case of attempted fraud, state reason for the failure of the fraud action | | |
| 13. | Any other relevant information | | |

Prepared by:  
Signature:  
Date:  

Approved by:  
Signature:  
Date:

የአ.ት.ዩ.ፒ ብሔራዊ ባንክ  
National Bank of Ethiopia  

Annex II  

Quarterly Summary Report on Fraud Outstanding  

Name of bank:  
Date:  

| No | Category/Type of Fraud (1) | Cases outstanding as at the end of the previous quarter | New cases reported during the current quarter | Cases closed during the current quarter | Cases outstanding at the end of the quarter | Total amount recovered | Provision held for cases outstanding as at the end of the quarter² | Amount recovered during the current quarter (10) | Amount written off during the current quarter (13) |
|----|-----------------------------|----------------------------------------------------------|-----------------------------------------------|-----------------------------------------|----------------------------------------------|------------------------|------------------------------------------------------------------|--------------------------------------------------|---------------------------------------------------|
|    |                             | No (2) Amount (3)                                       | No (4) Amount (5)                            | No (6) Amount (7)                      | No (8) = (2+4+6) Amount (9) = (3+5-7)      |                        |                                                                  |                                                  |                                                   |
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