Prime
Loan-related fraud doubles among financial institutions
Loan-related fraud has doubled in the last one year. Photo / File
What you need to know:
- Uganda Bankers Association says that loan-related scams have overtaken impersonation as the most recorded form of fraud among banks
Loan-related scams doubled in just three months to June, overtaking impersonation and identity theft as the most recorded types of fraud among financial institutions.
Data by Uganda Bankers Association (UBA) indicates that loan-related fraud grew by 23.2 percent in June, increasing from 23.3 percent in March to 46.5 percent in June.
The fraud rate had, however, slightly reduced in the period ended March 2023 to 25.7 percent.
UBA does not, however, indicate, who between customers and financial institutions, was the biggest victim of the fraud.
Previously, there have been reports of financial institutions inflating loan deductions, while some are accused of making loan deductions even when loan payments have been completed.
UBA further shows that card and mobile banking-related scams grew by 13.3 percent in the 12 months to March, becoming the second most recorded form of fraud among financial institutions.
During the period, card (debit and credit) and mobile or digital banking-related fraud rose from 31.9 percent in March 2023 to 45.2 percent but dropped to 31.6 percent in the quarter to June.
However, fraud resulting from impersonation, identity theft, forgeries, and cash suppression dropped from 40.4 percent to 31.3 percent, before reducing further to 29.1 percent in June.
Fraud remains a serious risk, requiring financial institutions to invest huge sums of money in mitigating losses occasioned by such scams.
While presenting a paper during the Annual Bankers Conference in Kampala on Wednesday, Ms Olivia Rimpa Matovu, the Ligomarc Advocates partner dispute resolution, said the 2023 annual police report recorded a loss of Shs1.8 trillion in economic crimes, of which only Shs80b was recovered, noting that it is vital for financial institutions to put in place safeguards that prevent fraud.
The 2024 Association of Certified Fraud Examiners global report indicates that organisations across the world lose 5 percent of their revenues to fraud annually with an average of 1,921 cases worth $3.1b reported during 2023.
Therefore, Mr Julius Kakeeto, the UBA chairman and PostBank managing director, while speaking at the Annual Bankers Conference, said the magnitude of the current fraud requires financial institutions to collaborate on promoting integrity among banking and financial sector staff, enhance systems and processes, and promote collaboration with key domestic and international anti-fraud stakeholders.
“The above notwithstanding, fraudsters also continue to invest and evolve including recruiting and training,” he said, noting that there has been growth in bank and payment services related fraud driven by increased rollout and adoption of digital financial services, low levels of digital and cyber security, and unemployment.
To mitigate this, Mr Kakeeto said, there is need to increase collaboration outside financial institutions to include security and law enforcement agencies domestically and internationally, invest in fraud detection human resources, and close knowledge gaps.
Impact of fraud
Bank of Uganda deputy governor Michael Atingi-Ego, says the fraud data paints an interesting picture, urging financial institutions to reinforce an anti-fraud environment, review delegation of authority, reward integrity, and set the tone for zero tolerance to fraud, among others.
Fraud, he says, makes people lose faith in the financial sector, which impedes the savings mobilisation role of the industry and ultimately undermines the financial inclusion agenda.
