Daily Times

KARACHI: In a case of Rs 836 million fraud, the Securities and Exchange Commission of Pakistan (SECP)’s Insurance Division has advised the State Life Insurance Corporation (SLIC) to improve its governance system by putting in appropriate internal control systems.

The SECP’s Insurance Division had initiated proceedings against SLIC and its Directors for failing to maintain legitimate ledger accounts of 500 policy holders.

In view of that, examination of the SLIC financial statements and further information called for by the department, revealed that the statutory auditors of SLIC have highlighted some observations. Moreover, the department had advised SLIC to submit ledger accounts of the 500 policy holders of the Pakistan Life Fund. The SLIC in response, provided a list containing names, policy numbers, premium due dates, collection dates, and premium amounts in respect of these 500 policy holders instead of providing the aforesaid ledger accounts.

“SLIC’s response to the observations was not found to be satisfactory therefore, a show-cause notice was issued to the SLIC calling upon them to show cause as to why punitive action should not be taken against them”, read the SECP’s order.

A hearing on the matter was held on November 30, 2016 where representatives of SLIC denied that any violation of Section 45 of the Ordinance had been committed. The SLIC stated that Policy Status and Collection Slips of the 500 policy holders have already been provided. Therefore, it is not true that legitimate ledger accounts were not being maintained.

They further added that there is no deficiency in the systems and protocol of SLlC and the fraud was engineered with the collusion of the employees and bank staff whereby duplicate files were created with different names and false documents were prepared. The SLIC further submitted that employees were colluding together and running a parallel system to perpetrate the fraud. The SLIC stated that some of the amount was recovered and further reiterated that the matter was referred to the National Accountability Bureau (NAB) an accordingly the issue is under their investigation.

The SLIC told SECP that it is consistently looking to strengthen procedures and protocols; hence, it is in process of fully implementing ERP based software in order to further upgrade its system and procedures for the purposes of achieving higher levels of efficiency. The SLIC stated that the gross difference in General Ledger and Schedules was identified and reduced from Rs 835.09 million to Rs 170.94 million with a net impact of Rs 25.257 million, in other words, 79.53% of the difference has been reconciled. Working on the remaining un-reconciled balance is under progress and it will be reflected in SLIC’s subsequent financial statements accordingly.

“I am of the view that the Respondents have provided the Policy Status and Collection Slips of 500 policy holders.

Further, the fraud at its Lahore Central Zone, highlighted by the statutory auditors, is being investigated by the NAB, therefore no conclusion can be drawn until the investigation is completed in this regard”, affirmed Hasnat Ahmad, Director Insurance, in the order.

Ahmad believes that the management of SLIC have not acted in a vigilant and professional manner and have not given due consideration to the issues highlighted by the statutory auditors of SLIC.