Internal Controls Questioned as Citizens Bank Faces Rs 49.1 Million Fraud Allegations

An internal investigation at Citizens Bank International has uncovered a Rs 49.1 million embezzlement scheme at its Kanchanbari branch in Biratnagar, leading to the suspension of nine employees. According to reports from NEPSE Trading, the fraud involved the creation of fictitious borrowers to siphon off depositor funds, raising serious questions about oversight at the financial institution.

Background and Context

The incident at the Kanchanbari branch is not an isolated event for the location. Approximately five years ago, the same branch was implicated in a similar fraud case that involved the then-branch manager, Rupesh Rajbanshi. The recurrence of such significant misconduct within half a decade has prompted scrutiny regarding the effectiveness of the bank’s corrective measures and internal governance protocols following previous infractions.

Key Figures and Entities

Among the nine suspended staff members is Rosie Kandel, the head of the branch’s operations department, who investigators believe played a central role in orchestrating the scheme. The group is alleged to have used their positions to bypass standard verification processes. The bank has since filed a formal complaint with law enforcement, triggering a legal investigation under banking offense provisions.

Legal and Financial Mechanisms

Details of the alleged scheme indicate a sophisticated operation designed to evade routine monitoring. Investigators suggest that the staff created "ghost" borrowers and disbursed loans in their names. Crucially, loan installments were paid regularly during the initial phase, creating an illusion of creditworthiness and allowing the fraudulent activity to slip past initial checks. The scheme was only unraveled when repayments faltered and a deeper internal audit revealed that the borrowers listed in the credit files did not exist.

International Implications and Policy Response

This case highlights persistent vulnerabilities in banking sectors regarding Know Your Customer (KYC) compliance and internal audits. While digital tools and stricter frameworks have been adopted, the alleged collusion of multiple employees demonstrates how human oversight can be circumvented from within. The situation underscores the necessity for independent audits, strict job rotation in sensitive departments, and real-time monitoring of loan disbursements to prevent systemic erosion of public trust.

Sources

This report is based on findings from NEPSE Trading and internal banking documentation regarding the Kanchanbari branch investigation.