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Leaked Report: Massive Theft and Fraud At First International Bank Liberia Limited

Leaked Report: Massive Theft and Fraud At First International Bank Liberia Limited

Monrovia – Forensic investigation into the financial operations of First International Bank Liberia Limited (FIBLL) shows comprehensive financial misdeeds including fraud and theft. 


Report by Lennart Dodoo, This email address is being protected from spambots. You need JavaScript enabled to view it.


FIBLL started operations graciously in Liberia and succeeded in opening eight branches in six years, but by the eighth year, it was totally bankrupt.

In November 2016, the Central Bank of Liberia (CBL) employed KPMG International to conduct a forensic investigation into operations of FIBLL and the activities of the CBL in relations to the bank from 2006 to June 4, 2016.

The investigation was to, among other things establish the causalities of the bank’s failure and the people involved in these failures.

KPMG also reviewed the approval of the overdraft issued by the CBL and the people who were the beneficiaries of the overdraft.

The audit firm also investigated relationships/links between the various transactions and any institution(s)/individual(s) related to the bank, its shareholders, managers, staff and affiliates to articulate the nature of the transactions and amounts involved.

The investigators also took into consideration related-party transactions, incidences of fraud and theft, notable patterns of irregularities and anomalies, regulations and supervision breaches; inflow and outflow of all external funding to the bank.

The investigative report, which remains confidential to the CBL, revealed that “FIBLL made losses from inception till it was closed down in June 2016 and some of its assets and liabilities were transferred to GN Bank.

CBL Supervision reports and FIBLL internal audit reports identified governance and internal control breaches, fraud, theft, liquidity crises and regulatory breaches, including under capitalization.”

Investigative Findings

The document obtained by FrontPageAfrica revealed that CBL’s exposure to the FIBLL was US$17,542,029.82 at June 4, 2016.

FIBLL did not meet the minimum prudential requirement set by the CBL.

The bank’s capital eroded year-on-year to the point that when the bank lost all its capital and became insolvent in 2013 as a result of minimum and no capital contribution by the shareholders; poor credit and loan management; poor management of maturity cycles; fraud and high operational cost.

The bank’s cost of operation accounted for 37% of its cumulative expenses whereas interest income earned from 2007 to 2014 was consistently lower than the operational expenses incurred.

Loan Management

There were pervasive breaches of the loan management process, according to KPMG’s investigation.

The audit found out that credit facilities that required the approval of Management Credit Committee, the Board Credit Committee were approved by people who did not have authority for such approvals.

The investigative report: “Credit references were not obtained from CBL prior to approval and disbursement of funds.

Loans and advances were made to individuals and entities that had not been customers of the bank for the required period of six months prior to application for the facility. Loans and advances were made to individuals without securing collaterals.”

Loans were also made to directors of the bank without following the FIBLL credit policy and the new Financial Institution Act of 1999.

A director of the bank, the investigation found out, secured four loans totalling US$982,966.86 between 2010 and 2013 without CBL approval - As at June 4, 2016, the balance on the loan US$518,583.36.

Several amounts were paid in loans to individuals who are relatives to employees of the bank without following the bank’s credit policy.

The report: “Between 2012 and 2013, FIBLL also made loans to 15 individuals who had relations with employees of the bank.

The processes for making these loans were fraught with irregularities. As at June 4, 2016, the outstanding balance on these loans were US$433,330.99 and LR$25,932,291.96, respectively.”

Without regards to the employee’s manual, some staffs of the bank take advances on their salaries and never paid back, leaving an outstanding salary advance balance of US$344,244.65 as at October 25, 2013. These advances were converted into loans but were never paid, the investigation uncovered.

Fraud

According to KPMG’s investigation, the First International Bank Liberia Limited lost US$1.200 million through account dormancy fraud, US$0.541 million through vault theft; US$1.103 million through managers’ check fraud; US$0.248 through vault cash fraud, amongst other fraudulent schemes totalling an overall loss of US$6.832 million.

Overdraft Transactions

KPMG noted that there was no evidence of approval of FIBLL continuous participation in clearing activities although the bank was in an overdraft position between June 2013 and 2016.

This breach of clearing policy, according to the investigators, led to the build-up of the FIBILL overdraft with the Central Bank of Liberia.

It also discovered that 2,771 regular checks with an aggregate face value of US$18,303,203.14 were cleared when customers’ accounts were in overdraft.

Also 671 managers’ checks with an aggregate face value of US$5,682,197.11 were cleared although customers’ accounts were in overdraft.

Incentives and Payments

Without Board’s approval, an aggregate payment of US$2,351,189.12 paid as staff bonus, incentives to the FIB group. 

In July this year, the CBL in a press release acknowledged the findings of the forensic investigation of FIBLL, which findings required a comprehensive action plan to address the issues.

The CBL said it was subsequently forwarding the report to the Executive to enable engagement with the requisite judicial/legal authorities, who will pursue the findings identified in the report consistent with Liberian laws.

The Central Bank noted that it had already instituted a number of measures to help address the key shortcomings identified in the report.

Accordingly, the CBL said it had developed operational procedures specifying terms and conditions for the provision of emergency liquidity assistance and has commenced work on a framework for the establishment of a deposit insurance scheme.

It also revised and strengthened its standing credit facility program.

Third, “We are currently working towards a crisis preparedness and management framework to help protect the financial system in the shortest possible timeframe to address any future problems.”

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