Cheque fraud widespread in Uganda, says financial report

A cheque being signed. A report has shown cheque fraud in Uganda is more rampant than in any other East African country. Monitor photo

Kampala- Cases of fraud involving cheques are more rampant in Uganda than in any other country in East Africa, a recent Deloitte report has shown.

The Financial Crimes Survey Report, 2013, released recently, reveals that 50 per cent of cheque-related fraud happens in Uganda compared to Kenya’s 44 per cent and Tanzania’s 14 per cent.

Uganda also leads in mortgage and accounting and financial statements fraud.
Kenya, which is said to be having a mature financial market, registered the highest prevalence of cash theft, asset misappropriation, credit card fraud, investments fraud and Real time gross settlement systems (RTGS) and Electronic funds transfer ( EFT) fraud.

RTGS and EFT are forms of transferring money from one bank to another or within the same financial institution in real time.
Tanzania, on the other hand, leads in bribery and kickbacks, money laundering, insurance claims fraud and cyber crimes – where perpetuators use Internet to hack into institution’s systems and defraud it.

The report estimates that Uganda loses between $1m (about Shs2.5b) and $10m (about Shs25b) annually to fraud while Kenya and Tanzania lose more than $10 million, each.

The study, however, reveals that in all the three countries surveyed, cash theft is still the largest form of fraud with Kenya posting the highest rate at 72 per cent followed by Tanzania (71 per cent) and Uganda (67 per cent).

Reasons for high prevalence
Prevalence of financial crimes was attributed to abundant liquidity in the industry, which makes it attractive to fraudsters.

Weak or inadequate financial crimes controls, manipulation of data and circumvention of information technology controls and diversity of products that are not matched with robust controls are the other factors.

Inability to punish fraudsters and pervasive use and advancement of technology with weak security controls were also cited as reasons for the prevalence of fraud in the region.

It is also said that majority of cases involving suspected fraudulent activities cannot be prosecuted nor thoroughly investigated due to lack of personnel and financial muscle of the authorities to do so.

Ecobank managing director Michael Monari disagrees with the findings, saying that what is hitting hard Uganda today is cyber crime and not cheque fraud.

“There is more cyber crime than any other fraud in Uganda today because cheques are being replaced by RTGS. I, however, agree with them that mortage fraud is high in the country,” he told this newspaper on Thursday.

Barclays Bank managing director Charles Ongwae, however, said the minimal use of other instruments like credit cards to carry transactions could be one of the reasons that makes cheques prone to fraud in the country since it is one of the widely used form of payment.

“A lot of people prefer carrying cash and using cheques; although steps have been made towards using RTGS, it is still limited to large sums of money.”
He, however, noted that fraud levels have generally reduced in Uganda.

Although some financial institutions do background checks on employee prior to recruitment in addition to monitoring employee activities in high risk departments, this is not enough to deter fraud, most of which is well-executed by both insiders, mostly bank employees and outside parties.

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