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Frauds by "Iute Credit" and "Fondi Besa", BoA raises alarm for non-bank institutions, numerous problems with lending

Frauds by "Iute Credit" and "Fondi Besa", BoA raises alarm

Non-bank institutions in the country seem to be getting more and more citizens. During this year, the prosecution has launched investigations into several cases of fraud against "Fondi Besa" and "Iute Credit", while the newspaper has provided data from the Bank of Albania on financial data for all non-bank institutions in the country. From the data reported by the Bank of Albania, it is noticed that the non-bank institutions that are more problematic and have used fraudulent schemes on the other hand have the highest level of activity compared to other institutions. Specifically, the total assets for non-bank financial entities, in December 2019 and in the first quarter of 2020 reaches the level of ALL 67 billion, increasing by 25.4%. This increase was mainly generated by the entities: Fondi Besa (41%), Iute Credit Albania (16%), Kredo Financë (11%) and others. It is already evident that the assets of non-bank financial entities account for about 3.9% of the total assets of the banking system, increasing by 0.8 percentage points compared to the previous year. But the rapid growth of their activity occurred during the pandemic when tier two banks underwent some changes and facilitated lending to help businesses cope with the pandemic. What stands out is that the quality of credit from these entities has started to decline. "The quality of credit provided by these entities until the end of the second quarter of 2020 was relatively good, but slightly declining compared to the first quarter a year ago. At the end of the first quarter, the financial system contained 30 NBFIs with a total assets of ALL 67 billion. The balance of non-bank financial institutions was respectively 3% and 22% higher compared to the end of 2019 and a year ago ", shows the BoA in the report on financial stability. According to the BoA, during 2019 and until the beginning of 2020, non-performing loans in the financial system have increased significantly. This result was influenced by the increase of non-performing loans by about 56.8% or ALL 1.5 billion in non-banks.

Problems of non-bank institutions

The BoA further lists the most frequent problems encountered in the activities of non-bank institutions. According to the reported data, all these institutions operate in a series of rules, but which are against the law and also hide the data that they have to publish in the central bank. Among other things, there is a significant lack of documents in the registration of clients and loans. “Non-compliance of the internal regulatory framework with legal / regulatory requirements; failure to notify the Bank of Albania of the responsible person; incomplete data in the centralized system as well as inaccurate categorization of clients according to risk; verification of clients' identities through legally valid documents; analysis of the client's profile and obtaining information on the source of income and the purpose of using the funds ”, the Bank of Albania notes. There are also gaps in the documentation proving the reasons for funding and their reporting to the central bank. Among other things, the employment of low-quality and untrained staff for these important issues is evidenced. “Job description for PPP / PFT issues; non-compliance with legal / regulatory requirements regarding the implementation of measures against terrorist financing; the role of structures in the process of implementing measures against the financing of terrorism, as well as the authority to report; training of low frequency staff on PFT issues; lack of focus from internal audit ", the report says. There are also gaps in the documentation proving the reasons for funding and their reporting to the central bank. Among other things, the employment of low-quality and untrained staff for these important issues is evidenced. “Job description for PPP / PFT issues; non-compliance with legal / regulatory requirements regarding the implementation of measures against terrorist financing; the role of structures in the process of implementing measures against the financing of terrorism, as well as the authority to report; training of low frequency staff on PFT issues; lack of focus from internal audit ", the report says. There are also gaps in the documentation proving the reasons for funding and their reporting to the central bank. Among other things, the employment of low-quality and untrained staff for these important issues is evidenced. “Job description for PPP / PFT issues; non-compliance with legal / regulatory requirements regarding the implementation of measures against terrorist financing; the role of structures in the process of implementing measures against the financing of terrorism, as well as the authority to report; training of low frequency staff on PFT issues; lack of focus from internal audit ", the report says. “Job description for PPP / PFT issues; non-compliance with legal / regulatory requirements regarding the implementation of measures against terrorist financing; the role of structures in the process of implementing measures against the financing of terrorism, as well as the authority to report; training of low frequency staff on PFT issues; lack of focus from internal audit ", the report says. “Job description for PPP / PFT issues; non-compliance with legal / regulatory requirements regarding the implementation of measures against terrorist financing; the role of structures in the process of implementing measures against the financing of terrorism, as well as the authority to report; training of low frequency staff on PFT issues; lack of focus from internal audit ", the report says.