Bank fraud shows failure of controls, says fraud expert


Posted at Jul 26 2017 04:28 PM

MANILA - Large cases of bank fraud point to a 'catastrophic' failure of the bank's most basic internal controls or a conspiracy among senior officials to cheat the institution, a fraud expert and former financial regulator said on Wednesday. 

William Black, a professor of economics and law and an expert on white collar crime, told ANC Early Edition that "in either case you want to hold the most senior officers in the organization personally accountable."

As the Bangko Sentral investigates the P1.75 billion Metrobank loan fraud involving one of its executives, Black said it is important to make sure the bank introduces reforms.

Maria Victoria S. Lopez, head of Metrobank’s Corporate Service Management covers her face as she is presented to the media during a press conference at the National Bureau of Investigation (NBI) headquarters in Manila on Friday. Lopez was arrested for alleged qualified theft, falsification, and violation of the General Banking Law.

The BSP earlier said Metrobank may bear some liability over the fraud case. 

"The only way an assistant vice president could create losses of this magnitude is whole scale dereliction of duty of the senior staff or actual complicity of even more senior officials," Black said. 

He however cautioned against imposing sanctions on the bank itself.

"In one sense they are already the victim, in many cases, of this fraud. In other words, they suffer very large losses," Black said.

He added that fraud is the leading cause of bank losses and bank failures. 

The BSP earlier said that Metrobank's size will allow it to absorb whatever losses it incurred from the fraud.