Electronic banking fraud taking root in Uganda
Oct 03, 2008
On the streets of Kampala is a loose network of criminals, savvy on the Internet and familiar with banking systems. They work with banking insiders to route money off customers’ accounts onto theirs.
By Lydia Namubiru
On the streets of Kampala is a loose network of criminals, savvy on the Internet and familiar with banking systems. They work with banking insiders to route money off customers’ accounts onto theirs.
Last Friday, in just one transaction, Stanbic Bank could have lost sh5b, had they allowed one of their clients to withdraw it as he had requested. In scrutinizing this huge withdrawal, the bank officials found that the money had been wired onto the account that very day. This account had been opened the day before and the money’s origin could not be traced. The bankers smelt a rat, tipped the Police who arrested the client.
Now, sources inside the bank say that criminals harked into the bank’s records to create records showing that sh10b was earlier deposited into that account at the Iganga Stanbic Bank branch. However, the teller indicated as having received the money does not exist in the Iganga branch!
While the Police will take time to get to the bottom of this scam if ever, it is a big eye opener about a growing evil in our banking sector — electronic bank fraud.
Many bank clients in Uganda will tell you that they have, at one time or the other, found significantly more money credited onto their accounts, only for it to disappear as mysteriously as it had appeared just hours later. Whose money is that?
Money laundering
“If one gets say sh40m through corruption or drugs they will want to disguise it. Routing it through other people’s accounts is one of the ways,†explains a source in Bank of Uganda (BoU). According to this source, money laundering is very real in Uganda and Uganda is internationally ranked high as a destination or route for laundered money. “We are very vulnerable because our economy is very free and open,†the source says. He says that in the olden days when foreign exchange was strictly controlled and only given out by the central bank, the sector was a lot more secure from money launderers.
Now, if a money launderer can access you account to route money through it, they can access your money as well. BoU recognises the growing problem and has established an Anti-Money Laundering Committee which will launch a sensitisation drive next month. An anti-money laundering bill has also been drafted.
Ugandan bankers have been aware of the growing problem of bank fraud for sometime now. In May 2005, they met at the Grand Imperial Hotel to discuss it. Johan Hartman, a Citigroup fraud manager exclaimed that Uganda was recording more fraud attempts than even Nigeria!
Justine Bagyenda of BoU re-assured the bankers that measures were being taken to fight the crime. An Economic Intelligence Unit was established by the central bank in 2005 to fight fraud.
Still, the vice has persisted and even evolved from the forged cheques to the more sophisticated electronic fraud. Police records show that bank fraud cases totaling to about sh11b were reported in the last two months alone.
Inside jobs
Police and Bank of Uganda blame the rise in e-bank fraud on weak controls within commercial banks since customers’ money is often stolen by banking officials working with outsiders. “You give me money to credit accounts 1, 2, 3 and I credit accounts 1, 2, 4,†one banker demonstrates. Account 4 would be one that was specifically opened by his criminals racket.
Some of the bank insiders currently facing fraud charges include; John Baptist Mbaziira of Bank of Africa (sh17m), four Crane Bank employees (sh50.6m), three cashiers of Capital Finance Limited (sh500m), Margaret Tumwine of Barclays Bank and Sarah Karungi of Crane Bank.
With an already porous banking sector, here comes internet and mobile phone banking where only a username and password stand between your money and a fraudster.
Elsewhere in the world, fraudsters are having a field day. Bank Safe Online, an initiative by UK bankers cites the commonest electronic scams as; phishing emails, Trojans and money laundering rackets.
With phishing emails, fraudsters trick people into revealing their bank log-in information. For example; one receives an email supposedly from his bank asking them to update their password and user name by clicking a certain link, only to end up revealing them to a fraduster.
Trojans are pop–ups or emails that carry tracking bugs onto computers. For instance, you may get an email or a pop-up on your screen saying, “Osama captured! Click here for details.†When you do, you will automatically pick up a virus that can record all the buttons you touch on your key board including your bank log-in information.
Alternatively, money launderers will try to recruit you into their racket with emails. Fraudsters contact prospective victims with “job vacancy†adverts via spam emails or job search web sites. They offer you the chance to earn some easy money for a few hours work each week, usually just requiring that you have access to the Internet.
When you get in touch, they cut you into the deal and ask for your account details so that they route money to you. You are then supposed to receive the money, take a commission off it and route it to another specified account. “Remember that you will be the easiest part of the chain to track down,†Bank Safe Online, advises on its website.
The central bank feels that it is the duty of the individual banks to curb fraud. “We get concerned but we are not the bank managers. We cannot go to the banking halls and stand guard,†says a deputy director in the central bank.
Sam Katwere, BoU’s acting spokesperson says, “We emphasise the ‘know your customer’ measure for curbing fraud.†By this, the central bank recommends that commercial banks should at least know the client’s address, occupation, telephone numbers and credit records.
Ironically, commercial banks hamper police investigations into fraud by refusing to expose it for fear of negative publicity according to Simeo Nsubuga, the Kampala Extra police spokesperson.
“Banks do not want to reveal what is happening. They say it is an internal matter,†he claims. Saturday Vision tested this claim. “I cannot go against bank regulations and comment on bank fraud which is a highly legislative issue,†said Michael Kiddu, the spokesperson for Barclays Bank. He suggested that we should instead write about the fact that Barclays has opened up a branch in Kasese! Asked to comment off record, he said that he uses a Barclays (mobile) phone and everything he says maybe recorded. Other bankers were as unwilling to talk about the issue.
A vacuum in our laws makes matters worse. “We are told that you cannot criminalise money laundering because there is no anti-money laundering law. I do not buy that argument. A thief is a thief! Nevertheless, we have drafted a bill,†says one of the central bank deputy directors.
-------------------
Protect yourself
-------------------
• Treat all unsolicited emails with caution
• To log-on to Internet banking, open your web browser and type the address in yourself
• If in doubt about the validity of an email, contact your bank immediately on an advertised number.
• Remember banks will never email you to request that you "confirm" or "update" your password or any personal information by clicking on a link and visiting a web site
• Install anti-virus software and run regular security scans
• Be wary of any unsolicited offers or opportunities for work, especially if the company is based overseas
• Contact your bank immediately if you think that you may have become involved in a money laundering scam
• If an opportunity to make some easy money seems too good to be true, then it probably is!
• Instruct your bank to let you know whenever big amounts of money are deposited or withdrawn from your account
• Check you account balance regularly and report any discrepancy to you bank. The earlier a fraud is detected, the easier it is to recover the money.
• Reconcile your accounts as soon as you receive your bank statements and do this on a regular basis.
• Mark the name of the cashier who serves you at the bank
• Keep your ATM receipts for evidence in case some money disappears from your account
On the streets of Kampala is a loose network of criminals, savvy on the Internet and familiar with banking systems. They work with banking insiders to route money off customers’ accounts onto theirs.
Last Friday, in just one transaction, Stanbic Bank could have lost sh5b, had they allowed one of their clients to withdraw it as he had requested. In scrutinizing this huge withdrawal, the bank officials found that the money had been wired onto the account that very day. This account had been opened the day before and the money’s origin could not be traced. The bankers smelt a rat, tipped the Police who arrested the client.
Now, sources inside the bank say that criminals harked into the bank’s records to create records showing that sh10b was earlier deposited into that account at the Iganga Stanbic Bank branch. However, the teller indicated as having received the money does not exist in the Iganga branch!
While the Police will take time to get to the bottom of this scam if ever, it is a big eye opener about a growing evil in our banking sector — electronic bank fraud.
Many bank clients in Uganda will tell you that they have, at one time or the other, found significantly more money credited onto their accounts, only for it to disappear as mysteriously as it had appeared just hours later. Whose money is that?
Money laundering
“If one gets say sh40m through corruption or drugs they will want to disguise it. Routing it through other people’s accounts is one of the ways,†explains a source in Bank of Uganda (BoU). According to this source, money laundering is very real in Uganda and Uganda is internationally ranked high as a destination or route for laundered money. “We are very vulnerable because our economy is very free and open,†the source says. He says that in the olden days when foreign exchange was strictly controlled and only given out by the central bank, the sector was a lot more secure from money launderers.
Now, if a money launderer can access you account to route money through it, they can access your money as well. BoU recognises the growing problem and has established an Anti-Money Laundering Committee which will launch a sensitisation drive next month. An anti-money laundering bill has also been drafted.
Ugandan bankers have been aware of the growing problem of bank fraud for sometime now. In May 2005, they met at the Grand Imperial Hotel to discuss it. Johan Hartman, a Citigroup fraud manager exclaimed that Uganda was recording more fraud attempts than even Nigeria!
Justine Bagyenda of BoU re-assured the bankers that measures were being taken to fight the crime. An Economic Intelligence Unit was established by the central bank in 2005 to fight fraud.
Still, the vice has persisted and even evolved from the forged cheques to the more sophisticated electronic fraud. Police records show that bank fraud cases totaling to about sh11b were reported in the last two months alone.
Inside jobs
Police and Bank of Uganda blame the rise in e-bank fraud on weak controls within commercial banks since customers’ money is often stolen by banking officials working with outsiders. “You give me money to credit accounts 1, 2, 3 and I credit accounts 1, 2, 4,†one banker demonstrates. Account 4 would be one that was specifically opened by his criminals racket.
Some of the bank insiders currently facing fraud charges include; John Baptist Mbaziira of Bank of Africa (sh17m), four Crane Bank employees (sh50.6m), three cashiers of Capital Finance Limited (sh500m), Margaret Tumwine of Barclays Bank and Sarah Karungi of Crane Bank.
With an already porous banking sector, here comes internet and mobile phone banking where only a username and password stand between your money and a fraudster.
Elsewhere in the world, fraudsters are having a field day. Bank Safe Online, an initiative by UK bankers cites the commonest electronic scams as; phishing emails, Trojans and money laundering rackets.
With phishing emails, fraudsters trick people into revealing their bank log-in information. For example; one receives an email supposedly from his bank asking them to update their password and user name by clicking a certain link, only to end up revealing them to a fraduster.
Trojans are pop–ups or emails that carry tracking bugs onto computers. For instance, you may get an email or a pop-up on your screen saying, “Osama captured! Click here for details.†When you do, you will automatically pick up a virus that can record all the buttons you touch on your key board including your bank log-in information.
Alternatively, money launderers will try to recruit you into their racket with emails. Fraudsters contact prospective victims with “job vacancy†adverts via spam emails or job search web sites. They offer you the chance to earn some easy money for a few hours work each week, usually just requiring that you have access to the Internet.
When you get in touch, they cut you into the deal and ask for your account details so that they route money to you. You are then supposed to receive the money, take a commission off it and route it to another specified account. “Remember that you will be the easiest part of the chain to track down,†Bank Safe Online, advises on its website.
The central bank feels that it is the duty of the individual banks to curb fraud. “We get concerned but we are not the bank managers. We cannot go to the banking halls and stand guard,†says a deputy director in the central bank.
Sam Katwere, BoU’s acting spokesperson says, “We emphasise the ‘know your customer’ measure for curbing fraud.†By this, the central bank recommends that commercial banks should at least know the client’s address, occupation, telephone numbers and credit records.
Ironically, commercial banks hamper police investigations into fraud by refusing to expose it for fear of negative publicity according to Simeo Nsubuga, the Kampala Extra police spokesperson.
“Banks do not want to reveal what is happening. They say it is an internal matter,†he claims. Saturday Vision tested this claim. “I cannot go against bank regulations and comment on bank fraud which is a highly legislative issue,†said Michael Kiddu, the spokesperson for Barclays Bank. He suggested that we should instead write about the fact that Barclays has opened up a branch in Kasese! Asked to comment off record, he said that he uses a Barclays (mobile) phone and everything he says maybe recorded. Other bankers were as unwilling to talk about the issue.
A vacuum in our laws makes matters worse. “We are told that you cannot criminalise money laundering because there is no anti-money laundering law. I do not buy that argument. A thief is a thief! Nevertheless, we have drafted a bill,†says one of the central bank deputy directors.
-------------------
Protect yourself
-------------------
• Treat all unsolicited emails with caution
• To log-on to Internet banking, open your web browser and type the address in yourself
• If in doubt about the validity of an email, contact your bank immediately on an advertised number.
• Remember banks will never email you to request that you "confirm" or "update" your password or any personal information by clicking on a link and visiting a web site
• Install anti-virus software and run regular security scans
• Be wary of any unsolicited offers or opportunities for work, especially if the company is based overseas
• Contact your bank immediately if you think that you may have become involved in a money laundering scam
• If an opportunity to make some easy money seems too good to be true, then it probably is!
• Instruct your bank to let you know whenever big amounts of money are deposited or withdrawn from your account
• Check you account balance regularly and report any discrepancy to you bank. The earlier a fraud is detected, the easier it is to recover the money.
• Reconcile your accounts as soon as you receive your bank statements and do this on a regular basis.
• Mark the name of the cashier who serves you at the bank
• Keep your ATM receipts for evidence in case some money disappears from your account