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The N8bn Currency Fraud In Central Bank

The banks whose members were involved in the scam should be penalized for producing bad ambassadors for such a sensitive assignment

Six officials of the Central Bank of Nigeria (CBN) and 16 members of staff of other deposit money banks (DMBs) are being prosecuted by the Economic and Financial Crimes Commission (EFCC) over allegation of N8 billion fraud. The suspects are accused of stealing and putting into circulation defaced and mutilated Nigerian currency notes worth N8 billion, meant for destruction.

The CBN explained that it discovered a syndicate of bank officials who had made a criminal business out of converting currencies meant for incineration for personal use and that the crime had been on for several years. The 16 suspects who colluded with the CBN officials to commit the fraud, are said to be officials drawn from Zenith Bank, FCMB, Wema Bank, Access Bank, FirstBank, Skye Bank, Ecobank and Sterling Bank.

The CBN also disclosed that it conducted a nationwide audit of all of its 37 branches and found that this was an isolated scheme at the Ibadan Branch. Giving detail of the systematic crime, the CBN said a routine internal audit of the bank’s cash destruction activities in September 2014 by its Briquetting Panel, comprising senior bank staff from different branches, revealed some anomalies at the Ibadan Branch, and immediately reported this to the Bank’s Management.

The bank, on further investigation, discovered that a systematic scheme, which had been on for several years, was being operated in which mutilated higher denomination notes originally meant for destruction were swapped with lower denomination currencies. This practice which the bank described as “interleafing”, involves fraudulent labelling of boxes containing defaced and mutilated notes, with a higher value than their true content with the intention of distorting surveillance process.

Having established beyond reasonable doubt that some wrongdoing had occurred, following internal investigations conducted by CBN, the bank disclosed that the affected members of staff who are middlelevel officers were, depending on gravity of offence, either summarily dismissed or immediately placed on indefinite suspension and thereafter handed over to the EFCC for further investigation and prosecution.

It must be emphasised that this criminal act bears negative impact on our monetary and fiscal policies and does not speak well of us as a nation. That the syndicate was able to operate such a systematic scheme undetected for many years, and in one and the same location, tells much about our public finance management process. The CBN whose responsibility it is to print and circulate the local currency, the Naira, cannot totally absolve itself of blame.

Knowing the sensitive nature of handling defaced and mutilated currency notes and the importance of disposing of them in the safest method, the apex bank ought to have put a system in place to track possible misdeeds that could arise from the exercise. That the bank lacked, or failed to use, a system that audits the process of collection, processing and disposing of defaced and mutilated notes is not a commendable commentary on the apex bank.

Besides the criminal input to the nation’s monetary and fiscal policy initiatives, injection of N8 billion ‘hot’ money into our financial system will definitely create a distortion in the process of determining critical monetary policy issues, such as exchange and interest rates. With the discovery, it is obvious that ‘hot’ money to the tune of N8 billion had been in circulation and must have created distortions between the records of CBN in terms of money released into the system and actual money in circulation.

No matter how perfect the calculations might be, the N8 billion must have contributed to wrong and misleading data from the CBN and related institutions. The local currency, Naira, has been under pressure in the last three years. This has resulted in overstretching the policy-making capacity of the CBN which has to introduce various measures to stem the server haemorrhage it had suffered.

The illegal eight billion Naira in circulation must have contributed to the pressure on local inflation. As experts have observed, the CBN has been under pressure to stem the overflow of liquidity in the financial system given the huge quantity of local currency in circulation as it could not be ascertained for how long the fraud of recycling dirty and mutilated currency had been going on.

The far-reaching implications for our public finance stability through interest, exchange and inflation rate management is a matter for concern. The CBN should institute a more effective process of processing mutilated currency notes and also ensure there is a strict audit system that would easily detect a violation. The officials who unmasked the long-existing syndicate should be identified for adequate recognition.

We advise the CBN and the deposit money banks to review the cashless policy and ensure that all identified and potential hitches are eliminated to fasttrack the process. Public awareness of the cashless policy should be stepped up and sustained.

The banks whose members were involved in the scam should be penalized for producing bad ambassadors for such a sensitive assignment. That way, it will send appropriate signals to the others who might habour such criminal tendencies that lead to the spate of high incidence fraud in the banking industry.

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