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"Only Few Banks Take The Issue Of Ethics Seriously"

Curious revelations from Astute banker and Chief Compliance Officer of First Bank, Uduak Udoh

Since money assumed the role of providing a standard of value and a medium of exchange in human transactions, its importance in the modern-day society has never waned. Also, its influence on the global economy cannot be overemphasised. Notably, if money is very essential to human existence and business ventures, then handling the commodity is even more crucial. Herein lies the issue of ethics in financial business.

In every financial institution, ethics is considered a key ingredient for success. But regrettably, in the pursuit of profit, commercial banks sometimes compromise on ethics and good practices. This fact was echoed by experienced banker, Mr. Uduak Udoh, the Chief Compliance Officer (CCO) of First Bank Nigeria, who recently turned 50. As the CCO of one of the oldest banks in Nigeria, Udoh understands better and appreciates the fact that the pursuit of profitability by banks must be balanced with ethics. He bemoans the tendency of the banking industry to take the issue of ethics with levity:

“Very few banks take the issue of ethics seriously. Ethics is not a question of morality. It is wider and universal. Banks don’t put ethics into consideration. They tend to play first according to the profit line which is about making money first. And when you look at that aspect, you tend to throw caution to the wind. Take for instance, during our last interaction with the Central Bank of Nigeria (CBN), a question arose as per what thevol 3-101 bank’s customer acceptance policy is. Customer acceptance policy is that rule or way of doing business that tends to define the sort of people you want to do business with, considering the reputational image you want to keep. It doesn’t necessarily talk about profitability. But these days, you see all aspects of money laundering with politicians siphoning money here and there.

There is no money by politicians which does not pass through the banks. One will wonder if these banks did nothing to question these people. The rule is that when you find such things, you tag them as suspicious transactions. Banking wise, you report it to the Nigerian Financial Intelligence Unit (NFIU). But even after reporting to the NFIU, that suspicious customer is still banked. The question now is what is such a bank’s customer acceptance policy? Don’t we have to do certain things to say ethically that we won’t bank this type of customer? That way we are sending a message to the community so that people would steer clear of such people. But banks now put profitability first,” he said.

Moreover, acknowledgement of the fact that the money under their care belongs to investors places greater responsibility on banks and reminds them of the need not to treat it as a mere commodity and not just another commodity being traded.

Writing on the subject ‘Ethical Issues Facing the Banking Industry’, Ricardo Sanchez Serrano of the Fidelis International Institute said: “To handle money as a commodity with no ethical implications and impact is to overlook critical moral issues; issues that could in fact be financed, and thus, enacted, promoted, and effectively created, by the investor’s money.” He queried that “in the end, whose money is the bank’s money? Who in fact, owns the money that financial institutions are investing and lending? In the end, it is the money of individual investors.”

Udoh would not stop at expressing his disappointment in the failure of banks to uphold ethics in their operations. Using his experience in First Bank as an illustration he noted that “In my own capacity as Chief Compliance Officer of First Bank, we try to profile our customers to be of a certain category and then we analyze them whether they are high, medium or low risk. And there is a certain extent of this high risk where we just have to close the accounts of such customers and sever the relationship. It is not just reporting to the Financial Intelligence Unit who may be inundated with so many reports and doesn’t act on time. The organisation has to take certain actions. Ethically, some banks are taking some aspects seriously, others are not.”

The role of bank chiefs in the gross abuse of ethics in the profession which resulted in the financial crisis of 2008 that almost brought the global economy to its knees is well documented. Speaking in a similar vein, Udoh opined that the failure of banks in the country is consequent on unethical conducts by bank chiefs. Hear him: “To a large extent it bothers on ethics because when you talk about sustainability, that is, doing business in a sustainable fashion, ethics comes into play. They were just looking at profitability today. They were not looking at building a sustainable business. And most of the time, it comes from the top. There is no organisation where you condone illegalities without creating room for the management to also do their own personal fraudulent practices. You find that when such happens, there will be serious conflict of interest which later affects the long-term standing of the business. But if the board doesn’t condone such and makes sure its management plays within the rule and is ethically sound and does sustainable business you find out that the organisation would stay longer. But when you have an executive management that tends to cut corners for the organisation, flout rules and break laws, they would also try to help themselves with the loot that they are perpetrating for their organisation. This conflict of interest would becloud their business, going forward. Ultimately the business suffers.”

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About two months ago, the CBN raised a red flag when it declared that two banks were already showing signs of distress. On this note, Udoh explains why some banks in the country continue to have issues with capital even after intervention by the apex bank through recapitalization and injection of funds into them few years back when they had liquidity problems.

“A recent publication carried it that CBN has observed that two banks are weak and have inadequate capital. So, you wonder again why. One would assume everything is okay and that it would be very difficult for any bank to fail with the N25 billion capital. Prof Chukwuma Soludo did the consolidation which was okay. And what he (Soludo) didn’t do, which existed then as a rule, Mallam Sanusi Lamido Sanusi came, dusted that particular rule and implemented it,” he said.

The unfolding unfortunate development with some commercial banks in the country as painted by the CBN ominously calls to mind the fate that befell some failed commercial banks and their CEOs few years back. Udoh offers explanation on Sanusi’s perceived high-handedness in criminalizing and punishing the erring CEOs of those banks then. “Criminalizing certain CEOs is more with respect to the fact that Soludo was not a banker but Sanusi was. Sanusi was not just a banker but he was in charge of risk management. So, there are certain things he knows and has seen. I remember when Sanusi was the Managing Director of First Bank; there were some issues on risk that pertained to other banks. As a risk manager, there were certain principles he wanted to take because First Bank was like a lender to most other banks. First Bank had the liquidity and lent funds to other banks locally and even offshore.

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There are certain things we try to do which are basically risk management processes. He has worked in the global space. In First Bank, he was able to affect other banks. There is something he said right from day one and most CEOs started getting jittery because they knew he understands the system. He looked at things from a risk management prism. Rightly or wrongly, I would say to a large extent, what he did was according to existing rules which he applied without sentiments knowing that those banks were guilty of what he saw and observed. He felt they had to be held accountable. It was necessary sanitizing the system. So, what he did was actually right. I have not seen any economy where the banks are making so much profit more than the industrial sectors. It doesn’t make any sense. I believe there was need for Sanusi to sanitize the system. It is an ongoing process and things ought to keep changing, so that we can be very competitive in the international community.”

No doubt, a thoroughbred professional, the Lagos-born Udoh, who had his secondary school education at the United Christian Secondary School, attended the University of Calabar where he studied Accounting, graduating with a Second Class Upper. He distinguished himself as a Mobil Scholar in school. He joined Pricewaterhouse for a few months, after which he moved to Nigerian International Bank, now Citi Bank, where he worked basically in treasury operations. Udoh had previously worked at Fidelity Bank, Eagle Bank before joining First Bank where he rose through the ranks working in different capacities – treasury operations, banking operations, internal audit, risk management and marketing – to become the Chief Compliance Officer of the bank.

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