BOU to banks: stop hiding cash thefts

A steep rise in cash thefts through mainly insider fraud schemes has soared in commercial banks, angering clients, and frustrating bank officials, who are shy to go public for fear of unsettling their customers.

Speaking at a recent anti-financial fraud forum, created to raise awareness about operational fraud, Tumubweine Twinemanzi, the executive director of Supervision at the Bank of Uganda, said the central bank intends to make it mandatory for all supervised financial institutions to report fraud.

Twinemanzi said the policy will re-energize the fight against fraud in financial institutions. Fraud manifests in three major categories. There’s cyber, electronic, or digital fraud, which constitutes 31.9% of all cases reported, and loan-related fraud, which constitutes 25.7%. The other category involves impersonation, identity theft, forgeries, and cash suppression, which constitutes 42.4%.

At least Shs 43.6 billion was stolen in 2022. In February 2023, about nine suspects were arraigned before the Anti-Corruption division in Kololo for stealing from a Stanbic bank client’s account. They raided the Stanbic client’s account and stole about $1.8 million.

Interviewed for this story, Fred Enanga, the police spokesperson, said the suspects, in connivance with some Stanbic bank staff at the Garden City and Freedom City branches, compromised the account of Nile Energy, effected inter-account transfers (IATs), and made withdrawals using three accounts in the names of Dixon Kagurusi Ampumuza, Petrom Limited, and Famane Investments Co. Ltd.

“At least three cash withdrawals and five inter account transfers were made on January 24, 2023, at Garden City: withdrawals of USD 40,000; USD 90,000, and IACs of USD 295,000, to Famane Investments Co. Ltd. and USD 300,000 to Petrom Ltd. On January 31, 2023, an IAC of USD 495,000 was effected for Petrom Ltd. On February 1, 2023, a cash withdrawal of USD 60,000 was made from the Freedom City Branch,” Enanga said.

He said on February 2, 2023, an IAC of USD 287,000 was made to Petrom Ltd. and another IAC of USD 295,000 was made to Dixon Kagurusi Ampumuza by the suspects, who purported to be Mohamed Abdul Hakim Hussein, the director of Nile Energy, while using forged documents.

It was also established that Petron Limited belongs to Oscar Kyabukasa Lutaaya and Hashur Rahman as directors, while Famane Investments Co. Ltd. is owned by Oman Ghebreyesus, Fiona Dede Bwende, and Elijah Daniel Wanzu as directors, at Freedom City Branch and Garden City Branch.

On February 3, 2023, Tefera Okubaslassie Robel, an Eritrean refugee, was intercepted. He had two inter account transfer forms, with a face value of USD 988,200, that were to be drawn from the Nile Energy account and, after that, credited into an account number in the names of Dixon Kagurusi Ampumuza.

The suspect also had in his possession, a Kenyan passport number, AK 0849025, in the name of Mohamed Abduhakim Hussein, which prompted the bank to verify with the account holders, who denied any authorization.

According to Sarah Arapta, the chairperson of the Uganda Bankers Association, about 206 incidents of fraud were reported in 2022. Most of the cases were in mobile banking, agency banking and cash suppression. She said at least 91% of the attempted fraud resulted in a loss.

In 2020, telecom service providers MTN Uganda and Airtel Uganda and Stanbic bank were reported to have lost over Shs 10 billion in an electronic fraud after unidentified fraudsters hacked Pegasus Technologies, the service provider for the three companies.

The companies, however, said the incident did not impact any balances on either bank or mobile money accounts. Several complaints have since been reported against Equity bank and Centenary bank. Last year, Equity bank clients claimed they lost over Shs 70 million to fraudsters.

HOW FRAUD OCCURS

Fraud is engineered either through internal or external collaboration. Financial institutions have systems and processes that are maintained by people, and they override them. That is how fraud happens.

There are fraudsters all over the world who look for weak points in each country. They find collaborators and introduce fraudulent practices from other jurisdictions into our society.

STANBIC BANK SPEAKS

Stanbic Bank chief executive officer Anne Juuko, said some organizations don’t report fraud incidents, but surprisingly, the thefts spill into public view.

“We are choosing to be courageous and bold as we find solutions to it. As an organization, it’s difficult to be effective in fighting fraud. We know that fraud is a global phenomenon. It is not happening in Uganda only,” she said, adding, “We are creating an anti-fraud forum that will be housed under the Uganda Bankers Association. This will include bankers and law enforcement. We shall create a common protocol, practices and procedures so that we make it difficult for fraudsters.”

“What we know, and all agree on as industry players is that the problem is there and it’s growing, and that we must work together to solve it. There are no proper structures against fraud in this country. So, we must build one brick at a time, and that is one such area where we can be able to track, report and share information,” she said.

UGANDA BANKERS ASSOCIATION SPEAKS

Wilbrod Owor, the executive director of the Uganda Bankers Association, said fighting fraud requires working with every party, including customers. He said we should not glorify fraudsters, but make it painful for them.

“Banking is based on confidence and trust that you keep your money in the bank, trusting that it will be there when you need it; anything that undermines that, will make you lose trust in financial institutions or the entire financial system,” he said.

He said when customers lose trust in financial institutions, “that has implications because an economy runs on a robust and sound financial system because savings are mobilized and used for investment. If money is being stolen, then you have a fundamental problem across the economy. It has reputational risks and positions the country badly.”

Owor said the financial sector is evolving fast and the legal framework needs to catch up. He said fraud has become more complex, global and sophisticated. It is important to catch up with those developments in legislative frameworks so that there are sufficient penalties that act as a deterrent against fraud, he said.

He said fraudsters are caught, but the penalties are very small, which they pay and walk away after stealing huge amounts of money.

The penalties are not punitive enough to discourage and make it painful for fraudsters, he said, adding that penalties should be tough so that fraudsters think twice before engaging in any fraud.

“We can propose and make changes in our legal regime and empower judicial officers with trends, knowledge and the sophistication of fraud because it has changed in form,” he said.

POLICE ELABORATES

Yusuf Ssewanyana, the acting director of ICT at Uganda Police, said originally, the financial institutions would work alone to investigate and detect crime. As we embrace the fourth industrial revolution, crime has shifted from normal traditional policing to digital policing, or e-policing.

“We are embarking on the digitization of our processes through e-policing. We see it as a platform for anchoring our energies into crime detection, prevention, and capacity building in terms of skilling investigators, technical people under the crime department and looking at the right tools to help them handle such cases,” he said.

We have been able to achieve a lot through collaboration and cooperation. We have managed to arrest and investigate several fraud-related cases,” he said.

HOW SAFE IS THE SAVER’S MONEY?

Owor said savers’ money is safe because they bank or save with regulated institutions supervised by BoU. Savers can easily say no to any commercial bank and take their money wherever they want.

He said there are systems and processes to ensure that customers’ money is safe, and that no one can withdraw or steal it from their accounts.

“We have 1,000 attempts daily, but less than three per cent succeed. In other words, 97% of them don’t succeed, which means banks have a robust system to protect their funds,” he said.

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