Mobile cash transfers aid criminals

Jul 03, 2010

AFTER kidnapping Kham Kakama, Godwin Tumusime called the baby’s father Sven Karikaho and demanded for a ransom of sh1m through mobile phone money transfer. It turns out that this is a growing trend in East Africa, which has particularly rocked the Kenyan capital Nairobi in recent weeks.

By John Semakula

AFTER kidnapping Kham Kakama, Godwin Tumusime called the baby’s father Sven Karikaho and demanded for a ransom of sh1m through mobile phone money transfer. It turns out that this is a growing trend in East Africa, which has particularly rocked the Kenyan capital Nairobi in recent weeks.

Typically, the kidnappers take a person hostage and then demand for ransom money through the mobile phone money transfer system, which makes it easy for them to evade arrest.

Three weeks ago the Kenyan police unearthed a gang that had kidnapped and killed a three-year-old boy and then took ransom money from the father, who was unaware that his son was dead. One of them had received the money through mobile phone money transfer, and was tracked down through his phone number. A watchman alleged to be one of the criminals led police to the bush where the body was found.

Only days earlier, the Kenyan Police handled another case in which a 10-year-old boy was kidnapped and the mother paid ransom money through mobile phone money transfer. The boy, however, managed to escape.

Within a few days Waweru Kagwari, a 22-year-old driver in Nairobi, was kidnapped and only released after the kidnappers got ransom money via mobile phone money transfer.

And only last week, 34-year-old Rose Mugo, was kidnapped as she went to shop for her daughter. She was later released after money was sent to the kidnappers through the mobile money transfer system.

In Uganda, the Police say, Tumusiime’s is the first case of that kind, but mobile phones have been used in other crimes. The police have called on the service providers and the public to be more vigilant in case the crime continues.

“I would be more comfortable if more measures were put in place to control the telecommunication companies in Uganda. I am not saying this in bad faith. But how can someone go to town and buy a sim card and his records are not taken?” the director of counter terrorism, Abas Byakagaba, wondered.

“A person can buy a card to use it to abuse another. Even phones are so cheap that a person can use it to commit a crime and then throws it away.”

The Police, he says, have handled many cases in which a person buys a phone and sim card for the purpose of committing a crime and thereafter, he throws away the whole set to avoid being tracked. The investigation hits a snag because the phone companies do not have the data of people buying sim cards. Sim cards are sold on the streets alongside sweets and cigarettes. “There is need to take proper records of an individual at all stages.”

In the case of Tumusiime, the Police used a combination of his mobile phone money transactions and the path he took to receive the bulk cash. Whereas in this case the Police were able to nab the kidnapper, a Saturday Vision investigation has revealed glaring loopholes in the mobile money transfer system that needs to be plugged.

To send money, you must be registered and be in possession of an account. The account number is one’s mobile telephone number. The details required for registration are your name, year of birth, village of residence, your profession and identity card, voters card or utility bill. For all this, the companies rely on information volunteered by the subscriber.
The account is accessed using a secret code which is given to the client after he is registered.

The system, which is only two years old in Uganda, has attracted large numbers of users because it is cheap, has many outlets and devoid of the complicated requirements set by banks. The service is also available 24 hours.

In a single transaction, each of the companies allows only sh1m to be sent. That helps to check on money laundering and other evils.

At the MTN outlet in Lugogo, it took our reporter an hour on the mobile service queue to get to the counter and it was the similar case at the utl outlet in the same area.

In Mukono town were the public has not fully taken it on, it took him 10 minutes to make a transaction. One common factor at the outlets of the various services is that the client must identify himself to get the service. To access any of the Zap services for Zain, the client must have a Zain number and must be registered.

The Zain Marketing Manager, George Buza, said registration of both the sender of the money and the receiver is aimed at guaranteeing the security of the money.

“We keep tracking the transaction to ensure that they are legally carried out and we step in immediately we are suspicious of any transaction,” Buza said.

However, the company, like other service providers, does not demand for verification, say from the LC, employer or recommenders.

For MTN and utl, money can be picked by anyone whether registered or not, as long as the sender is registered. A client who is registered needs to present two things, the ID and his secret code to access his account while the none registered customer pays a bigger charge and only presents an ID or a voter’s card.

Mark Kaheru, the utl communications manager, said it is easier to track a registered customer after a transaction than a non registered client.
A source in the finance ministry said there is no law governing mobile phone money transfers since it is a recent development, and the central bank does not directly supervise telecommunication companies.

As a safeguard for customers’ funds, they are required to work in partnership with commercial banks that are regulated by the central bank.

The central bank requires partner banks and telecommunication companies to institute strict risk management procedures to safeguard customers’ money. Finance ministry officials say the upcoming amendment of the Financial Institutions Act, 2004, will capture recent developments, such as introduction of mobile money transfer services.

Kaheru says utl’s holding partners are dfcu Bank and that today, utl has about 40,000 customers accessing the M-Sente services across the country.

According to Buza, Zain’s holding partner in the Zap services is Standard Charted Bank. He said Zap services are currently accessed by about 150,000 customers.


Isaac Nsereko, the chief marketing officer of MTN, said the company has partnered with Stanbic Bank and UBA Bank to offer the services.

He said UBA was in charge of distribution while Stanbic is responsible for regulatory issues and compliance. He declined to reveal the number of customers using the mobile money services.

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