Capitec Bank Uncovers Major Employee Fraud

Capitec Bank, a leading retail bank co-founded and partly owned by South African billionaire Michiel Le Roux, recently dismissed several employees involved in a debit order switch manipulation scheme.

The forensic services department received a tip-off about employees at the KwaMashu Midway Crossing Branch manipulating the banking system. The implicated employees used external bank account numbers that did not belong to clients during debit order switch submissions.

They aimed to increase the number of debit order switches to qualify for the bank’s “branch team awards.” As a result, the bank fired 12 service consultants.

The competitive nature of South Africa’s banking sector drives banks to entice consumers to switch their financial products, including home loans and investments.

Additionally, banks aim to get clients to switch accounts, particularly those into which their salaries are paid. For instance, FNB dismissed and debarred a branch consultant for manipulating loan values to earn higher commissions.

The consultant inflated loan amounts and transferred excess funds back to customers, earning commission on the inflated amounts. In April 2023, Nedbank reported internal fraud costing R50 million ($2.8 million), net of insurance recoveries. No clients’ funds were taken in this incident.

Corporate South Africa has witnessed several instances of employee fraud and corruption. The mobile communications group Vodacom dismissed 631 workers and contractors for fraud in the year ending March 2023 after investigating over 8,000 cases, resulting in 15 arrests.

The professional services firm KPMG lost R16 million ($896,000) due to a former bursary specialist diverting funds meant for student fees in 2021 and 2022. Additionally, authorities arrested a former employee of Absa for allegedly defrauding the bank of R103 million ($5.76 million) by transferring the money into six bank accounts from September to December 2021.

These incidents underscore the importance of stringent internal controls and monitoring within financial institutions. Capitec’s recent actions reflect a necessary step in maintaining integrity and trust within the banking sector. Implementing internal controls and conducting regular audits are crucial in safeguarding against fraud and ensuring the stability of financial institutions.

Founded in 2001 by Michiel Le Roux, Jannie Mouton, and Riaan Stassen, Capitec offers transactional banking services along with a suite of loan products including term loans, credit facilities, and credit cards. The bank boasts 7.8 million “fully banked” clients, exceeding Nedbank’s main-banked clients by nearly 50 percent and eclipsing similar categories at other major South African lenders like FNB, Absa, and Standard Bank.

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