Monday, May 20, 2024
BusinessBanks pin hopes on National ID to stop fraudsters

Banks pin hopes on National ID to stop fraudsters

Office finalizes roadmap for NBE to obligate banks through a directive

In light of fraud plaguing the banking industry, commercial banks and the National Bank of Ethiopia hope the National ID program will stop the illegal activities and pleaded for the full realization of the project at the earliest possible time.

Earlier last week, the Ministry of Justice revealed a study conducted in the banking industry concerning fraud. Based on 155 cases it looked in to in the last four years, the Ministry revealed that close to 1.9 billion of birr was involved in bank frauds, and over 1.5 billion birr was lost.

The National ID Program Office, under the Office of the Prime Minister (PMO), had also finalized the roadmap to give to the central bank so that it can prepare a directive for banks to obligate their clients to have the IDs.

Currently in the process to have its first proclamation, the program office is also preparing roadmaps to other regulatory offices such as the Ethiopian Communications Authority to regulate their sectors, according to Yodahe Zemichael, executive director to the office.

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“Even though it won’t solve the problem fully, it can at least help minimize it highly and also identify the offenders easily,” Yodahe said adding, “This will also help banks in their Know Your Customer (KYC) reach a big step.”

A decision left on the hands of the central bank on how long it should take banks to finalize registering their clients into the program, Yodahe says it should not take a longer period given that bank customers are just a third of the population.

Even though the regulation will become effective soon, the adoption rate in relation to logistics and equipment availability puts the applicability period in uncertainty.

“If all is available and goes well after making it an obligation, it might take six months, but if the adoption rate is slow, it might take two years or so,” said Yodahe.

Registering residents for the ID card is currently taking place at the program office and will soon be applied at service providing institutions including banks and health centers, but the ID will remain the same for every stakeholder. 

Officials of commercial banks and Yinager Dessie (PhD), governor of the NBE, said during the discussion and study presentations, that fraud is happening via fake cheques, CPO, cheque theft, account theft, mobile banking, ATM, remittance transfer, and password thefts. These, according to Yinager, would be stopped or at least be minimized highly once the National ID service is applied on banks’ customers.

Amounting to 38 percent, the biggest fraud occurred via fake cheques and cheque theft with cooperation of bank and ethio telecom officers, followed by frauds involving bank accounts at 21 percent and abuse of power by officials at 18 percent.

“Without any doubt, unavailability of National ID is the common denominator of all the frauds,” Yinager said. “There is no question that the National ID would stop the fraud, so the process to apply it on banks should be faster than its current pace.”

Commercial bank officials also commented on the national IDs importance. The concept of having a unique identification for everyone will be necessary in the fight against fraudulent actions, according to Melaku Kebede, chief executive officer of United Bank.

“Instead of banks giving their customers special identification cards, it would be productive to have a national one,” said Melaku.

Most of the cases studied and revealed by the Ministry of Justice involve several fake IDs used by a single person.

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