Bank fraud blamed on insiders
Eva C. Komandjaja, The Jakarta Post, Bogor, West Java
Most bank fraud cases here occur with the help of employees who have access to the accounts and are capable of persuading decision-makers to dole out funds illegally.
Sigit Pramono, president director of state Bank Negara Indonesia (BNI) said that if someone intended to embezzle money from a bank, especially a large one, they would try to build a relationship with one of the insiders.
"The relationship would be maintained for two to three years until these insiders could be persuaded to do anything, especially illicit things. Banks are very prone to this kind of method," Sigit explained during a seminar on bank fraud over the weekend.
The pattern was evident, according to Sigit, in cases involving state banks such as Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Internasional Indonesia (BII) and BNI, which caused trillions of rupiahs in state losses.
"Internal controls within the banking institution are not working properly. Inspectors, who should supervise the whole administration of a bank, have to report to the head of the branch. But what if the head of the branch is involved (in the scandal) too?" Sigit said.
Member of the House of Representatives' Commission XI on finance, Dradjad Wibowo, asserted that stricter internal control mechanisms within each institution were necessary, as embezzlement mostly involved bank employees.
Dradjad found that the graft cases involving banks were mostly in the form of fake letters of credit, lending limit violations and fake bonds.
BNI and Bank Mandiri reportedly had Rp 1.3 trillion (US$136 million) embezzled, in a scam that involved fake letters of credit in 2003.
Lending limit violations are cases where insiders' involvement is a must, said Dradjad.
"Lending scams take place when a bank's board of directors work together with the debtors to disburse loans illegally so that they can all share part of the loan for themselves," he said.
A group of former top executives at Bank Mandiri have been implicated in an alleged lending scam, which caused Rp 12 trillion in state losses for channeling loans to 24 companies in contravention of bank regulations.
"This type of fraud has been popular since the government has encouraged companies to seek infrastructure loans from banks, although they can be very costly, and are seen as high-risk due to a longer period of return, not to mention the vulnerability to mark-ups," Dradjad said.
The pattern changes when it involves smaller banks, which are usually managed by the owners or close relatives.
"In small banks, fraud is usually perpetrated by bank owners who take money from customers' accounts and run away," Dradjad said, referring to the Bank Global and Bank Pacific cases.
Police are still looking around for two top executives from the now-defunct Bank Global for effectively stealing customers' money by issuing fake bonds.
Dradjad urged the central bank to tighten supervision over banks to prevent more scandals involving insiders.
"Taking money from a bank by illegal ways is a very easy thing to do as long as you have enough money to start with and you can bribe the bank employees and then law enforcement personnel if you get caught," Dradjad said.