1. Fraud Prevention, Detection, and Mangement
Oscar M. Maninantan
FICOBank
2010 RBAP-MABS National Roundtable Conference
2010 RBAP-MABS National Roundtable Conference
Hyatt Hotel and Casino, Manila
June 2-3, 2010 Casino, Manila
Hyatt Hotel and
June 2-3, 2010

2. Presentation for
2010 RBAP-MABS
National Roundtable Conference
Topic: Fraud Prevention, Detection and
Management
Mr. Oscar M. Maninantan
Head, Internal Audit Department
Hyatt Hotel and Casino, Manila
June 2-3, 2010

3. One of the first 29
cooperative banks
organized under a
Presidential Decree (PD
175 – Strengthening the
Cooperative Movement)
as an accompanying
measure of the
government’s Agrarian
Reform Program.
The goal was to develop a
cooperative banking
system owned by farmers
to replace the landlord as
the traditional source of
production credit.

4. 1976 – The bank was established.
1980 – Upon the issuance of BSP license, the bank opened its
doors to the general public.
1999 – The bank expand its market by participating in the
microfinance program of PCFC.
2001 – The bank signed up with RBAP to adopt the MABS
Approach for individual microentrepreneur borrowers.
Microfinance Performance as of December 31, 2009.
No. of Active Borrowers : 1,328
Loan Outstanding : P 37,822,401.48
No. of Account Officers : 16
No. of Branches Implementing
MF Individual Loan : 8 Branches
Area of Operation : Region 02

5. 1) Implementation of strict/stringent loan process.
 Management created a “Branch Credit Committee” where all loans (regular and
micro) are reviewed and deliberated before approval/recommendation. The
members are: Branch Manager, Assistant Branch Manager, and Teller/Cashier.
2) Conduct of monthly post release documentation Audit.
 Department conducts loan documentation audit on a monthly basis. All released
loans (regular and micro) are reviewed. Any exceptions noted are reported to the
Credit Committee that meets every month. The CRECOM is composed of 3
members of the BOD, the President, the EVP, Compliance Officer, 2 SVP, Head
of the Internal Audit Department and the Branch Managers.
 Regular audit that includes review of the loan portfolio of the branch are
conducted twice a year. The result of the regular audit is reported to the Audit
and Inventory Committee. The AIC is composed of 5 members of the BOD and
Compliance Officer which meets every month and reports all major exceptions to
the Board of Director. The BOD meeting is on a monthly basis.

6.  Special Audit is also conducted whenever there are major exceptions noted in the
regular audit.
 Spot audit is also conducted on a regular basis.
3) Efficient MIS.
4) Introduction of measures as deterrent for committing fraud.
 Client visit by supervisors/managers.
 Requiring AOs to issue Ors.
 Granting incentives to AOs
 Strict implementation of Code of Discipline.
 AOs not authorized to waive penalties.
 Regular rotation of AOs.

7. 1) Regular review of delinquency report.
 Supervisor/Managers review delinquency reports and visit/validate accounts with
noted missed payments. Any complaints from clients are acted immediately.
2) Field Validation.
 Supervisors/Managers conduct validation on loan proposals. Any material
discrepancies in the proposal will cause the denial of the loan.
3) Conduct of immediate Special Audit as a result of:
 Major exceptions from Regular Audit.
 Complaints from clients.
 Information from other parties.
 Validated information from supervisor/manager.
 Complaints of unremitted/unreconciled deposits/loan balances by
supervisors/managers are verified and any infractions are reported immediately
to COO and Internal Audit Department for proper investigation.

8. 4) Follows bank’s protocol in fraud cases.
The Internal Audit Department, immediately, upon receipt of
complaint/report of fraud, follow the following procedure:
1) Forms audit team for the special audit. Prepares letter to the
Branch/Department.
2) Coordinates with HRAD for the issuance of preventive suspension or
transfer order of the personnel concerned.

9. 1) Audit Process:
a) Gathering of documents and other needed information.
 Gather documentary evidences.
 Get details from interviews with clients, witnesses and if possible
validate these information from other sources who may have
knowledge of the fraud.
 If possible get signed statements from witnesses and secure original
copies and/or certified photocopies of documents.
 The interview should be done in strict confidentiality to protect the
reputation of the client and the bank.

10. b) Preparation of formal report.
 Facts in chronological order.
 Amount of accountabilities/persons responsible.
 Violation of internal control policies.
 Weaknesses in the internal control.
 Recommendations:
- policy issues
- administrative accountabilities

11. c) Submission of report.
 The audit report is submitted to the President and the Audit and
Inventory Committee of the BOD.
 The Audit and Inventory Committee submits recommendations to the
BOD.
 Under section 7 of the circular no. 410, within thirty (30) calendar days
after discovery, the case should be reported to BSP:
1) Any material findings involving fraud or dishonesty (including
cases that were resolved during the period of audit); and
2) Any potential losses the aggregate of which amounts to at least
one percent (1%) of the capital.

12. 2) Administrative investigation and imposition of sanctions.
 BOD approves the recommendations of the Audit and Inventory
Committee and refer the case to a special Investigation Committee so
that the concerned personnel can be given his/her legal rights to a fair
investigation. The Special Investigation Committee after conducting its
own investigation will decide on the case and will recommend to the
BOD the appropriate sanctions.
 BOD approves the sanctions.
 HRAD will implement the sanction.
3) As per policy, all fraud cases are strictly confidential. However,
Management can always discuss cases to serve as lessons and
deterrent to other personnel.
4) The lessons learned from these cases are the basis for
strengthening the internal control policies of the bank and
instituting new ones if ever there are no existing policies.