What you need to know:
In lead. Country tops list of fraud cases perpetuated through cheques.
Players in the financial services industry have been urged to put in place strong security controls to curb the ever increasing fraud in the East Africa region.
Speaking at the launch of the Deloitte 2013 Financial Crimes Survey report in Kampala, Mr Robert Nyamu, the director Forensic and Litigation Support Deloitte, said there has been an increase in cases of fraud in the region due to financial institutions’ failure to put in place high-tech controls that match the kind of innovative products put on the market.
According to the report, Uganda loses between $1 million (Shs2.4 billion) and $10 million (Shs24.9 billion) annually to fraud while Kenya and Tanzania lose more than $10 million, each annually.
“We salute the innovation happening in the financial services industry but we feel a lot needs to be done because as more innovations are rolled out, there is need to elevate the security systems to make it more challenging for fraudsters to get their hands on depositors’ money,” Mr Nyamu said on Wednesday.
Although cheques and cash used to be the most vulnerable channels used to defraud financial institutions, Mr Nyamu noted that Real time gross settlement systems (RTGS) and Electronic funds transfer ( EFT) fraud (wire fraud) are now emerging as vulnerable channels targeted by fraudsters.
This, he said was mainly because of the huge sums of money wired through the systems.
RTGS and EFT are forms of transferring money from one bank to another or within the same financial institution in real (shortest) time.
Prevalence of financial crime was attributed to:
Liquidity: Abundant liquidity in the industry, weak or inadequate financial crimes controls, manipulation of data and evasion of information technology controls as well as diversity of products which are not matched with strong controls makes it easy for fraudsters,.
Punishment: Inability to punish fraudsters, pervasive use and advancement of technology with weak security controls were also cited for the prevalence of fraud in the region.
Resources: Majority of fraud cases can’t be prosecuted or thoroughly investigated due to lack of personnel and financial capacity of the authorities to do so.
Variance by fraud cases in the three east african countries
RTGS and EFT fraud, cash theft, asset misappropriation and credit card fraud are highest in Kenya, which is said to be a relatively mature financial market compared to Uganda and Tanzania.
Uganda, however, tops the list of fraud cases perpetuated through cheques, with 50 per cent of cheque related fraud reported to be happening in Uganda compared to Kenya’s 44 per cent and Tanzania’s 14 per cent. The country also leads in mortgage and accounting and financial statements fraud.
Tanzania on the other hand leads in bribery and kickbacks, money laundering, insurance claims fraud and cybercrimes – where perpetuators use internet to hack into institution’s systems and defraud it.
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 of 72 per cent followed by Tanzania (71 per cent) and Uganda (67 per cent).