Major bank launches internal audit over suspicious loans backed by weak collateral

A major Moroccan banking group has launched an extensive internal audit after uncovering potentially fraudulent loans granted to business owners and contractors using weak real estate collateral, sources told Hespress AR.

The investigation focuses on loans where the pledged properties represented barely a quarter of the requested financing. In some cases, borrowers offered land unsuitable for construction or agriculture, exploiting administrative loopholes after registering the plots.

According to the sources, the bank’s central management has frozen large loan applications and imposed stricter risk controls, requiring on-site evaluations of collateral before any new approvals. The audit is also reviewing additional loans flagged as questionable.

Preliminary findings suggest that some bank employees may have bypassed credit risk procedures by submitting favorable appraisal reports and omitting critical details about the location and real market value of the pledged land. Auditors noted that some reports emphasized plot size while ignoring zoning changes that could sharply reduce property value.

Four major credit files, totaling more than 160 million dirhams ($16 million), are under scrutiny. The loans were secured by sprawling plots in remote areas or under restrictions that rendered them largely worthless. Several of the beneficiaries have since defaulted, citing failed investments, and sought court protection through bankruptcy or liquidation procedures.

The bank’s compliance team is also reviewing cases sent to litigation after borrowers abandoned their properties. Experts said pursuing legal recovery is complex because the borrowers formally met documentation requirements, leaving the bank’s own appraisal process as the main line of defense.

Sources said favorable expert reports allowed the beneficiaries to secure large loans and then walk away, exploiting gaps in oversight.

The ongoing audit is expected to lead to tightened internal controls, potential disciplinary measures against complicit staff, and referrals to court for suspected fraud and abuse of banking procedures.