Ecobank Faces Major Losses Due to Fraud Vulnerabilities in Card Operations

Ecobank has reportedly lost millions of dollars between 2020 and 2022 due to significant weaknesses in its card operations team, which exposed the bank to potential fraud by employees and merchants.

An internal report reviewed by TechCabal outlines critical lapses in Ecobank Kenya’s operations that allowed transaction manipulation to go undetected for two years, raising serious concerns about the bank’s oversight and technological safeguards.

While the report does not disclose the total financial impact, it highlights that $43.4 million was mistakenly recorded in the bank’s system, with an additional $162,346 rejected by payment service providers like Mastercard. Furthermore, the bank failed to recover $232,464 in chargebacks.

The report indicates a need for adherence to merchant operations procedures, particularly in managing general ledgers (GLs). “Many manual entries posted therein were unprocedural and some erroneous,” it stated, noting that there were no adequately documented operating procedures for various card products. This led to a mixing of entries for different card products within the merchant acquiring GL.

Control gaps and insufficient training for transaction processing teams exacerbated errors, leaving the bank’s card operations susceptible to fraud. An investigation also revealed a concerning $2.1 million balance in the general ledger without supporting documentation, further questioning the legitimacy of the funds and their potential ties to fraudulent activities. This balance had decreased from an initial $15 million as of July 2022

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The report criticized the weak implementation of the maker-checker process, an internal control mechanism designed to prevent unauthorized transactions. Additionally, the bank’s chargeback monitoring process was inadequate, allowing discrepancies and potential losses to persist.

The card operations team frequently failed to upload necessary transaction source documents. For instance, between July and December 2021, the daily merchant general ledger recorded a debit of up to $34.8 million without corresponding credits.

Furthermore, eleven entries totaling $16.2 million were duplicated, making it impossible to accurately determine merchants’ payable and receivable amounts.

Other transaction files were uploaded months after the funds were transferred, complicating the reconciliation process. Notably, transactions from March to May 2022, valued at $11.6 million, were only uploaded in late June.

Ecobank Kenya still needs to respond to requests for comments regarding the report’s findings.