Bank of China Makes Remarkable Progress in Special Campaigns against Fraud Cases

On November 15, 2005, Bank of China spokesman Wang Zhaowen briefed the press on the Bank s efforts and progress on special campaigns against fraud cases. He said that in 2005, Bank of China launched special campaigns at all levels of the bank to improve rules compliance, control cases and check business operations in light of the problems existing in the areas of internal control and risk management.

The occurrence of cases was effectively contained by improving rules and regulations, tightening restraint mechanism, and intensifying the punishment on related business management departments and relevant high level leaders. Both the number of cases and the amount involved in these cases dropped off rapidly, meanwhile, the rate of case interception was visibly higher.

Wang Zhaowen said that Bank of China took a series of strong measures to ensure the special case-control campaign could truly serve its purpose.

First, Leadership was strengthened for the special case-control campaign. In the year 2005, the Bank s senior management held a number of meetings on the countermeasures and the strengthening of organization and leadership for case control. An internal control committee and a leading group for the special case-control campaign were set up, with the bank president serving as the group leader.

Senior management of the Bank would go to the regions with high incidence of frand cases, directing case investigation and carrying out investigation on strengthening internal control and the special case-control campaign. Some hundred leaders from the Bank s Head Office, who were assistant general managers or senior, were sent to the subsidiary institutions to study the weak links of internal control at basic level and offered specific guidance to the special case-control campaign.

With regard to the regions with a high incidence of cases, the Head Office organized related business departments in the form of fact-seeking groups or expert groups to help direct business operations of branches.

Second, Extensive and in-depth inspections were conducted in the special case-control campaign. The Bank inspected all business subsidiaries, checked cash store on May 1 and October 1, and made open and secret investigations. In all, a total of 17,415 top-notch professionals were mobilized to form 4,657 inspection teams, which inspected more than 11,300 business institutions.

The inspections focusing on 76 items of 21 business links, were carried out in five steps: the branches at basic level conducted self-inspections first, the provincial branches then organized inspections, the Head Office carried out spot checking on key branches and sub-branches, those found liable were punished, and reviews were held over the business inspections and the special case-control campaign.

The checking on cash store on major holidays, the open and secret investigations and other forms of business inspections strongly pushed forward the special case-control campaign and the business inspections. While 17 cases committed in the year were discovered, 65 cases of fraud or 76.5% of all were successfully intercepted.

As a result, RMB494.39 million in fund was either recovered or intercepted.

Third, Business processes were consolidated and internal risk control was tightened. In strengthening account reconciliation between the Bank and the enterprises, the branches where conditions permitted checked the business accounts of their subordinate branches in a unified way. The branches where conditions did not permit conducted classified, graded or cross checking on the accounts of their subordinate branches.

When inspections discovered un-booked accounts or erroneous accounts, the cases were handled outside the originating units. In addition, the operations of the post supervision centers were further standardized to ensure independent inspection and supervision covered all business operations and business activities completed by branches of basic level.

Currently, a total of 797 post supervision centers were established within the bank, covering 96% of institutions of basic level. Meanwhile, in order to improve risk prevention, systems for large-amount transactions or abnormal transactions were being developed or improved to exercise real-time monitoring of doubtful large-amount transactions with corporate or personal accounts.

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Fourth, Control over branches of basic level and key posts was strengthened. A compulsory leave and rotation system was introduced for managers in charge of institutions of basic level. In keeping with the provisions of the Rules of Bank of China for Managing the Rotation of the Leaders of basic level Business Institutions, all branches had to arrange the leaders of their basic level institutions to go on compulsory leave and adjust the personnel on key posts in a timely manner.

The right of county sub-branches to practice independent accounting was drawn back to the tier-2 branches. The video-monitoring system was strictly enforced at all business outlets. All the tier-2 branches gradually integrated their supervisory institutions and organized special personnel to regularly scrutinize all the videotapes and established the specific systems for registering videotapes and recording their contents.

In addition, real-time monitoring was conducted for the abnormal behaviors at the counters of business outlets. Working groups for teller management were set up, and made it a rule that the heads of all branches and their accounting and settlement departments were in charge of teller management. As a result, the management over tellers was strengthened.

Fifth, Internal control systems were further improved. Bank of China set up a leading group to overhaul rules and regulations of the bank. 2,436 rules and regulations were combed, and 298 needed to be further improved. In the meantime, more than 20 business guiding documents, including the Guidelines of Bank of China for Internal Control and the Guidelines for the Internal Control of Business Subsidiaries, were worked out and issued for implementation in a timely manner.

These documents specified the key points and risk points for controlling the business processes of credit, fund, deposit, credit card and settlement, and requested the business personnel to strictly comply with them.

Sixth, Major cases and those involved in the cases were seriously dealt with. Whenever a big case occurred, the head of the relevant branch would be suspended from his duties and be investigated upon the order of the Head Office. In the special case control campaign, a total of 31 branch heads or deputy heads were removed from office.

In handling big cases, the administrative departments, the business management departments, the principal leaders of these departments and their immediate superiors would be seriously dealt with. For example, in handling the extremely serious financial fraud occurring at the Hesongjie sub-branch in Heilongjiang Province, the Head Office severely punished 34 people involved in the case, including 13 people at the higher level who were responsible for the management and leadership and another 13 at the provincial branch, also for management and leadership.

In the course of the special case control campaign, a total of 3,045 people were punished for violating rules and discipline, 4,252 people were punished for relevant responsibilities, 1,448 people were punished for leadership responsibilities, and 936 people at higher levels were punished for leadership responsibilities.

Wang Zhaowen stressed that Bank of China also intensified compliance cultural building while focusing on case control. Employees would be taught how to operate according to laws and corporate rules. As a result, an atmosphere was created in the bank to observe the principle being strict in the administration of the bank and being compliant in business operations . This education campaign helped employees gradually raise their awareness of being law-abiding and fight against irregularities in order to uproot the ideological cause of case occurrence.