The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

The Government has summoned the Royal Bahamas Police Force (RBPF) to further investigate alleged fraud and other irregularities at the Post Office Savings Bank, with the Cabinet Minister responsible acknowledging the need for a “radical shift” in oversight.

Glenys Hanna Martin, minister of transport and aviation, confirmed to Tribune Business that the police had been asked to probe the findings of a damning Auditor-General’s report into the Post Office Savings Bank’s operations and internal controls.

Mrs Hanna Martin revealed that auditors from the Auditor-General’s Office remain stationed at the General Post Office, working there on a daily basis to ensure there is oversight to the Post Office Savings Bank’s operations.

“Clearly there must be a radical shift in the approach to this bank, and as to the appropriate oversight required for what in fact is a critical financial institution throughout our country,” the Minister told Tribune Business.

“As to the observations and/or findings of the Auditor General as to alleged irregularities, the matter has been referred to the Royal Bahamas Police Force.”

Mrs Hanna Martin said the Auditor-General’s report was currently being reviewed by her Ministry, and added: “We are currently in discussions with the Ministry of Finance on the findings, and in agreeing a course of action ahead for the Savings Bank.

“The Ministry has been long advocating for automation of the processes at the Post Office and, in particular, the Savings Bank. While the Auditor General does not mention it in his report, this process commenced before his recent report was released. That work is now well under way.”

Mrs Hanna Martin explained that the process of automation would involve a review of standard operating procedures, the correction of any deficiencies in operational and internal controls, and recommendations for fraud mitigation.

The report by Auditor-General Terrance Bastian, tabled in Parliament last week, warned of “an underlying tone of fraud” at the Post Office Savings Bank, with customers able to deposit and withdraw sums more than 100 times’ greater than legal limits.

Detailing the findings from a more than three-year investigation by his staff, he found that the Post Office Savings Bank suffered from “significant internal control weaknesses” relating to the acceptance of deposits and account withdrawals.

In particular, the Auditor General zeroed in on how one account holder was able to withdraw more than $923,000 from the Post Office Savings Bank over the 15-months to April 8, 2015, even though the law and ‘Savings Bank Rules’ stipulate that account balances cannot exceed $6,000 in any one year.

Then there was the “inexplicable” case of another Post Office Savings Bank client who withdrew some $668,553 more than he had deposited over the three years between May 2012 and April 2015, even though the law, again, prohibited credit in excess of $6,000.

Mr Bastian said this particular client had deposited $613,915 with the Post Office Savings Bank over that three-year period, yet had withdrawn a collective $1.282 million from their five separate accounts.

“The amount of approximately $669,000 withdrawn from the Post Office Savings Bank by this beneficial owner in excess of deposits held is inexplicable,” the Auditor-General found.

“This shows a breakdown in management’s oversight in carrying out the mandate of the Post Office Savings Bank and safeguarding customer assets. Based on this discovery, it appears that there is an underlying tone of fraud.”

Apart from the $6,000 client credit limit “at any time”, and $6,000 annual limit on account balances, the maximum limit on one-time deposits is a mere $3,500. And, while this beneficial owner had five accounts, Bahamians were limited by law to just one Post Office Savings Bank account.

Mr Bastian’s attention was also drawn to the 18 cheques drawn on the Post Office Savings Bank’s account with Bank of the Bahamas for the benefit of just one client.

Between December 19, 2013, and April 8, 2015, these cheques were used to withdraw $575,928 in Nassau and $347,800 in Freeport. The Nassau withdrawals were approved via an authorisation letter numbered PO/135/2, while the Freeport withdrawals came through cheques issued to the Post Office Savings Bank customer.

The Auditor General, noting that the same number was used repeatedly on authorisation letters, said the transactions again breached the limits in the Savings Bank Act.

“Adherence to these rules should be followed at all times so as to avoid the Post Office Savings Bank being susceptible to a heightened level of risk around deposit holder funds in excess of that which is allowable under the law,” Mr Bastian found.

“Acceptance of funds in excess of $923,000 deposited by one beneficial owner contravenes all rules relating to the establishment of the Act. Only through acceptance of funds by the cashiers, other Post Office Savings Bank personnel and/or management were these withdrawals allowed to occur.”

Mr Bastian said the Post Office Savings Bank was “running the risk” of being perceived as a commercial bank, an institution subject too much stricter Know Your Customer (KYC) and source of funds due diligence.

“The Post Office Savings Bank should not be acting in the capacity of a financial institution by accepting excessive funds and then further contravening the Act by allowing the withdrawals to occur without any due diligence being performed,’ he added.

The Auditor-General added that strict compliance with the Act was essential to ensure the “Post Office limits its exposure to possible instances of fraud, acceptance of funds from fraudulent activities, participation in acts that may be deemed to be of a suspicious nature, and reputational risks around the contravention of its own rules and laws”.

“The excessive amounts being allowed to be deposited and withdrawn from the Post Office Savings Bank is, in our opinion, negligent on the part of the Post Office as the Savings Bank Rules clearly state that accounts should not exceed $6,000 in any one year,” the Auditor-General said.

“Due to these instances of contravention, it is clear that the staff of the Post Office did not follow the Rules of the Post Office Savings Bank as outlined in the Act.

“To allow a customer to make numerous withdrawals in a given day from several passbooks, from several Post Office Savings Bank locations, with amounts in excess of that allowable in the Savings Bank Act, and where no computerised system is present, gives rise to probable fraudulent activity.”