Finance and leasing companies (FLCs) operating in the Sultanate are required to implement tough new guidelines for detecting and combating fraud with effect from July 1, 2018. The new norms are set out in a Master Circular on Fraud Risk Management issued by the Central Bank of Oman last week. They assign, among other things, greater responsibility to the Boards and executive managements of FLCs in effectively managing fraud risk. Besides, they affirm the importance of Fraud Risk Management frameworks, policies, systems and measures to be put in place by FLCs across their operations.
“Frauds have rapidly evolved as a continuous threat and FLCs have to be ever on guard to foil the attempts of fraudsters. They have to pro-actively attune their policies, procedures, processes and technologies in line with the emerging trends / developments / concerns and stay ahead of the adversaries. Further, FLCs should unequivocally commit themselves to prevent frauds / dishonesty and actively promote an enterprise-wide anti-fraud culture,” said CBO Executive President Tahir Salim al Amri in a circular issued to FLCs operating in the Sultanate.
Non-banking FLCs play the role of financial intermediaries serving distinct segments of the financial services market. At present, there are six FLCs which, between them, operate a total of 43 branches around the country.
According to the CBO, frauds are perpetrated either because of weaknesses in systems and processes or failure to adhere to prescribed guidelines. “From a control perspective, frauds are committed on account of either the absence of controls or ineffective controls / ability of management to override controls. A resilient and well-functioning internal control framework is thus the strongest deterrence against fraud,” the regulator said.
In this regard, the apex bank calls for FLCs to put in place an effective Fraud Risk Management Framework (FRMF), which broadly consists of Fraud Risk Management Policy and Fraud Risk Management Systems. The latter, in particular, should incorporate appropriate and effective measures to address fraud risk, it warns. Notably, FLCs should carry out pre and post reference checks on new recruits. Those with suspect backgrounds should be promptly weeded out at the outset, the circular states.
The regulator also underlines the importance of robust appraisal and strong credit monitoring systems in preventing fraud in loan accounts. “Many frauds have been committed by availing credit facilities on the strength of forged salary certificates / salary transfer letters, fake mulkiyas / title deeds and other false submissions,” it warns. TURN TO P14
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