Chase Bank Africa in Hot Water over Insider Loans

June 28, 2016

Chase Bank found itself in the media earlier this year after it was revealed that its African branch had irregularly advanced 16.6 billion shillings (Sh) to a variety of entities, many of which were associated with bank insiders, and all without proper security. The Central Bank of Kenya (CBK) released a statement indicating that it had placed Chase Bank Africa under statutory management; it also noted that in one case a director had lent himself Sh7.9 billion. This places the bank in an extremely precarious position as it is unclear if the owners of the deposits—mostly small and medium-sized enterprises—will ever be fully refunded.


CBK also noted that on top of the loan to the director, there is also an additional Sh8.7 billion that could go unrecovered because large portions of it lacked documentation or were not being serviced. In the most recent update on the story, the Kenya Deposit Insurance Corporation (KDIC) contends that Chase Bank used Islamic banking products to sanitize these bad loans, while the now former directors of Chase Bank are deflecting blame by pointing fingers at their audit firm for “professional ignorance” regarding the Islamic banking products.


After the bank reopened on April 27, depositors have been able to access up to Sh1 million. To date approximately Sh2.7 billion in loans have been recovered, helping restore confidence in the bank.


While it’s unclear—given the various conflicting statements and opinions—how these unsecured loans came about and whether they were truly illegitimate, what is crystal clear is that an effective system to monitor accounts and transactions would have been beneficial to the bank and its stakeholders. Our Account Activity Manager and Loan Examiner apps use CaseWare IDEA® Data Analysis software to monitor 100% of the data related to loan and deposit accounts. The apps would have detected the unsecured loans and alerted the appropriate stakeholder of the issue so it could be addressed.


The banking apps perform a variety of tests on loan and deposit account data to identify control weaknesses and detect fraud, errors and omissions. Financial institutions can identify any issues or exceptions early, reducing the chance of the organization being negatively impacted and allowing the problem to be remediated effectively.


Read the blog post on our banking apps for more information, or visit the IDEA Marketplace to purchase the Loan Examiner or Account Activity Manager apps to quickly get a clear picture of all data and activity associated with your loan and deposit accounts. 


About Anu Sood:

Anu Sood is the Director of Product and Corporate Marketing at CaseWare Analytics and is responsible for the company’s global marketing strategy. Prior to CaseWare Analytics, Anu worked in various roles in the high-tech industry and her accomplishments range from writing software for telephone switches to launching a new global satellite communication service. Anu has extensive experience in strategic marketing, corporate communications, demand generation, content marketing, product management, product marketing and technology development.