Institute of Southern Punjab (ISP) Multan

Southern Business School (SBS)

Assignment No: 01

Discipline: BBA

Section:B

Date:26/04/20

Subject: Risk Management

Student Name: Muhammad Asim

Student Reg #: 023-R16-82

Student Signature: Asim

Submitted to: Sir Farzan Yahyah

 Question#
Types of Risks by Mikes and Kaplan
Answer
Telenor investigates Rs514M fraud in microfinance bank
 Telenor is investigating suspected extensive fraud in its microfinance bank in Pakistan, according to
news reports from Norway.
Verdens Gang (VG), a Norwegian tabloid newspaper, and Dagens Næringsliv (DN), a Norwegian
business newspaper, both reported on the ongoing case earlier this week.
In an article published on 7 December, DN reported that the Telenor Microfinance Bank says it has
been scammed for around NOK 30 million, or around PKR 514 million. The bank has identified 14
people, 12 of whom are local bank employees, and two of whom are external loan agents.
The DN managed to obtain access to a police report in Lahore. According to the article, there was a
hearing on Saturday in Lahore where Telenor bank’s lawyer, Waheed Riaz, and several of those
accused of fraud appeared. The meeting, however, was postponed.
According to the police report, the loan agents were recruited by the branch’s staff, who created 1638
false loan applications.
According to Riaz, the accused constructed ‘ghost clients’ to create fake loan applications. The bank
employees then approved the loans and transferred money.
The accused have denied the allegations.
According to Profit sources, an inspection team from the State Bank of Pakistan also arrived earlier
this week to help investigate.
The fraud has been alleged to have been ongoing since February 2017. The actual amount may differ,
as the current figure only refers to one branch, out of the bank’s 171 branches in Pakistan. Other bank
branches are currently under investigation.
Telenor’s communications director Gry Rohde Nordhus said in an email to DN that they cannot
comment on the details of the case as the investigation is still ongoing.
As per the article, after issues with the branch’s loan portfolio arose, the bank set up an investigation
team in August 2019 to investigate. The team concluded there had been a number of false loan
applications, and that bank employees had granted loans to people without sufficient documentation.
The bank’s management in Pakistan notified Telenor in Norway in September 2019 of the possible
scam. Telenor’s board was also informed. Telenor ASA then decided to start an investigation in
October 2019.
When reached for comment, Telenor Pakistan said that they have followed all procedures, and acted
swiftly when they were first made aware of this scam. They also notified the State Bank of Pakistan
immediately when this was first brought to management’s notice.
Telenor Pakistan also said they are working closely with the State Bank on this case, and have filed an
FIR against the employees involved. They are also investigating the branch to ensure that there is no
further scam.
Telenor Microfinance Bank is based in Karachi and was founded in 2006. It was later acquired by
Telenor Pakistan in 2008.

Suggestion:
While every business strives to hire honest employees, having a formal hiring routine, even at a small
business, can help prevent fraud. Background checks should be performed for all staff handling cash
or managing payments (and bank account information) from customers. As the employee’s level of
interaction with finances increases, so too should the scrutiny paid to their past, and present,
situations.
Although it may seem counterintuitive, employees committing fraud are often found to be the most
endeared by their coworkers, because the person will go out of their way to help and gain trust, often
working longer hours and rarely taking time off. This results in them handling several duties, and with
less oversight. Likewise, employees facing sudden financial challenges in their personal lives may
succumb to temptations. Requiring staff to take their vacations can help expose fraud, if it is
occurring, and also can help relive overworked honest employees.