Leasing companies have been advised to come together in fighting fraud in the leasing industry. The General Manager of Capital Bancorp, Mr. Joel Olarinde, gave the advice at the Lease Business Forum organised by the Equipment Leasing Association of Nigeria (ELAN) in Lagos last week.

The theme of the forum was "Protecting and Optimising Your Lease Investment: "Best Practices and Standards."

Olarinde suggested that leasing companies should co-operate to prevent fraud and deal with fraudsters either by direct communication with each other or through formal bodies.
Speaking on fraud and leasing, Olarinde stressed the need for a proper validation of the customers' identity and specific needs before the investment otherwise known as KYC (Know Your Customer).
His words: "Even if you are dealing with an existing client, do make sure you validate what is going on by talking to your usual contacts. Do not take anything at all at face value or else one day you will regret not having gone the extra mile."

The general manager also stressed a need for maintaining a very healthy level of suspicion about the validity of support information, for instance, as to whether there is anything odd about the accounts, that is whether the format changed from the previous year.

In structuring leases, Olarinde stated that the objectives should be about tailoring the lease to meet lessee cash flow, focusing the interest rate in the lease and mitigating lessor credit risk.
In acquiring assets, Olarinde explained that receipts should be written in the names of both the lessor and lessee, while lessor becomes unsecured creditor of the lessee if the lessee files a petition in bankruptcy.
Talking about best practises and standards, he explained that in asset level accounting, the ability to track and account for an asset at a detailed level is a best practise.
Others are the existence of responsibility accounting system and allowing for partial termination and upgrade.

A best practise also includes opening of a customer master file, which will provide the information for understanding the customer relationship across multiple relationships.
"In addition to regulatory compliance, a single master file facilitates other best practise implementations such as web enabled customer service," he said.
On documentation management, Olarinde stated quick response to customers' request for statements or other documents as well as production of documents both on demand and automatic.
His words: "Workflow combined with business rules takes ordinary transactions, processes and procedures and automates them with a degree of predictability and repeatability that drives overall efficiency in the right direction.

"Communication with other applications and business partners in an electronic format facilitated by a universally accepted standard is an efficiency building best practise," he said.
The Capital Bancorp boss, however, said that currently there is no specific leasing law.
According to him, the most perfect lease agreement will not provide protection if there is no government and legal support for the development of leasing.

He added that while leasing is governed by common law as handed over by the British, Companies and Allied Matters Act, Companies and Income Tax Act and the Banking and Other Financial Institutions Act, inadequacy of the legal framework leads to the ambiguity involved in ascertaining the exact legal definition.