Robbing banks from the inside

By JayasriPriyalal

A young man robbed S$ 30,000 at MNC bank branch in Holland Village in Singapore on 7July. The robber simply delivered a handwritten note to the bank employee at the counter and got away with the money and took a flight on the same day to Bangkok.He had also taken a meal from a popular nearby hawker centre before taking the flight; and acted very cool. 

Singapore Police acted swiftly and with the cooperation of Thai Police the man was caught while staying the night in a hostel in Bangkok. Justice is yet to be served on him, as the Singapore authorities could not get him extradited from Thailand. The criminal has been deported to Canada by Thai authorities.

The current estimates of cybercrimes volumes is about $ 445 billion. The banks are taking a substantial share of the burden. So the S$ 30K robbery may sound as a petty crime.

There are number of popular movies based on the true stories of bank robberies in the past. The Great Rivera Bank Robbery and the Great St. Louis Bank Robbery were a few thrilling movies of yester year.What is unique isboth movies have made bank robberies look great, aptly titling themas great robberies.

‘The Bank Job’ was a recent movie involving another bank robbery. The movie ‘Shawshank Redemption’ is based on a classic story around money laundering. The movie depicts how trust and confidence is being cunningly abused when human weakness of greed becomes unrestrained.

The story is quite relevant to the contemporary cases reported in the media with the advent of the global financial crisis. As revealed, certain bank CEOs’ compensation packages were equivalent to the compensationpaid to star players in the various European football leagues. Banks had access to public deposits; whereas swindlers like Bernard Madoff played out the rich Americans to the tune of $ 50 billion. 

Now Madoff is serving 150 years of a jail term for the crimes committed. Unfortunately some of the bankers connected with similar criminal activities are still running freely as they are too big to jail. Surprisingly some wealth managers from well-known banks had placements with Madoff. Imagine their prudence in risk assessment.

In all the bank robberies in the past as referred above, they were planned and executed by criminals who were outsiders.Movies became thrilling as the story depicts how the robbers dig tunnels into banks’ strong safe lockers and rooms. But today it is evident that banks are being robbed by insiders and not by the outsiders. White collar crimes are on the rise and as a result public trust and confidence in the financial system is declining.The Pramuka Bank fiasco is one such classic example from Sri Lanka. Regulatory authorities approved a banking license to a person who had questionable integrity while serving as a CEO in another commercial bank. The rest is history.Sri Lankan Intelligence authorities managed to net the Head of the LTTE terrorist outfit’s financial operations KP, but the Pramuka banking wizard RPis still running scot-free.

The behaviour of some of the directors and CEOs in private sector banks and finance companies inSri Lanka is no better than their counterparts in North America and Europe when it comes to extravagance. But what is alarming is that this culture is now adopted in the State-owned banks in Sri Lanka. Recently there were media reports concerning tender irregularities involving a substantial amount of money in a procuring a digital banking system in one of the State-owned banks in Sri Lanka to the tune of $ 11 million.

State-owned banks play a vital role in the economy. Governments in power can effectively use the banks to stimulate the growth in real economy by channelling creditto the priority areas. Non-existence of State-owned commercial banks in Europe was the main obstacle to drive sufficient growth after the financial crisis with quantitative easing and stimulus packagesreleased by many central banks.State-owned banks are expected to run their operations efficiently in a cost-effective manner. All avoidable expenses need to be cut down to minimise transaction costs so that the customers are not burdened. 

Moreover, the banks have to be extra-cautious in migrating to next generation technology at present, as the banking business model is changing fast in the on-demand digital economy. Technologies that facilitated the banks to enjoy economies of scope are over. Disruptive technologies are in the forefront, FINTECHs are dominating the finance industry on mobile and cloud computing platforms. 

These tendencies demand a meticulous cost benefit analysis; to ascertain whether the banks are procuring the right technology compatible with Near Field Communication(NFC) enabling digital payment services via smart phones. A State-owned bank to flout the tender procedures and rushing to invest in huge amount in a hurry raises doubts, concerns and suspicion, particularly in this Yahapalana era.

Banks should have sufficient autonomy to operate and decide on investment on the right technology at the right time. Sometimeback,State-owned Bank of Ceylon faced a constrained in procuring a computer system, as the Government tender procedures became a bottleneck. Later it was revealed that a highly-connected Chairman of a newly-formed private sector bank was behind the delay through various influences, in order for his bank to get the sole agency of a credit card brand over Bank of Ceylon. 

Banking and finance industry has paid a heavy price over greed of a few individuals in private banks and scandalous corruptions in public sector banks across the globe,resulting in reputational damages.Restoring customer confidence has to be the number one priority along with widening financial inclusions in the communities for the banks if they are to survive. If not they will soon be obsolete.

Since the enactment of the Right to Information Act in Sri Lanka officials of theState are bound to give information to the public as and when it is called for. Accordingly the banks have to become transparent in purchasing luxury vehicles for top officials as the boards of directors will have to be accountable on all their decisions to the public. No doubt this will improve corporate governance in many State-run institutions as well. 

This writer strongly believes in the dictum“what is not right don’t do, and what is not correct don’t say”(or write), but is concerned that the State bank referred to responds and corrects the public perception and shows that the bank followed the due process in procuring the new digital banking system, confirming that there were no irregularities involved as such reports should not damage the bank’s reputation.

The writer was a former banker for 25 years and was a Senior Vice President of Ceylon Bank Employees Union. At present he working for UNi Global Union in Singapore.