By ADAM IHUCHA,
Cyberfraud is raising its ugly head in Tanzania’s
banking industry, thanks to techno-savvy criminals for colluding with
bank staffs to siphon off cash out of customers’ accounts.
Cyberfraud refers to any type of deliberate deception for unfair
or unlawful gain that occurs online. The most common form is online credit card
theft.
But, the rackets remain shrouded in camouflage as the victimized
banks choose to suffer silently in a bid to safeguard their reputation.
Police records show that between 2010 and the first quarter
of 2013 cyber fraud-related loss in banks stood at around Tsh 9.8 billion
($6.10 million).
The Police cybercrime unit said between 2011 and 2012, at
least 500 Tanzanians were arrested over fraud cases.
Pereira Silima, the deputy Minister for home affairs, said
about 320 people were apprehended between July and December 2011, whereas 2012
saw 230 people arrested over the crime.
More recently, Exim Bank in Arusha became a latest victim of
fraud and theft; where nearly Tsh7billion ($4.4 million) was allegedly siphoned
off out of customers’ accounts in the biggest ever bank fraud case in
Tanzania.
Deputy Minister of Finance, Ms Saada Mkuya said cybercrime
was becoming an economic disaster, prompting the State to fast track the
enactment of the cybercrime law.
“Looking beyond the numbers, cyber fraud spells economic
disaster not only for bank customers, but also for the financial institutions
mainly banks,” she said.
It is understood that the government is working on a draft
cybercrime bill but the same is yet to be made public.
According to government officials and bankers, the most
reported fraud in banks in Tanzania involves card skimming and ATM
withdrawals.
Identity theft, electronic funds transfers, bad cheques,
credit card fraud, loan fraud and investment scandals are the other major
avenues that criminals are using to defraud banks.
Mid-February, 2013 police reported that ATM fraudsters
siphoned off Tsh 500 million ($312,500) out of the customers’ accounts in
various banks in Mwanza.
Growing cases of fraud and cybercrime mean that financial
institutions need to urgently invest in detection and preventive mechanisms, as
today’s fraudsters are increasingly sophisticated.
The increased incidence of fraud has prompted banks to
individually or jointly craft initiatives to stem the crimes.
Risk experts said a growing number of technology-savvy bank
employees and increased accesses to the Internet have opened the East African
region up to fraud.
A 2011 survey by financial services consulting firm Deloitte
shows a young technophile, who has worked for one organization for several
years, is the possible mastermind of fraud cases.
Deloitte said companies, especially those dealing with huge
sums of money like banks and supermarkets, are ill-prepared to fight this
onslaught, which is costing them millions of dollars annually arising from
information security breaches and corporate theft.
Risk experts said while rising cases of fraud are motivated
by personal greed, there are increasing cases which are driven by pressure on
individuals to achieve higher profit and budget targets.
Case
On September 20, 2013, Tanzania filed a criminal case
against the 14 former Exim Bank employees over the fraud and theft in the
Resident Magistrate Court of Arusha.
They denied the charges. A State Attorney, Mr Diaz Makule
alleged before the court magistrate, Ms Devota Kamuzora that the ex-workers of
the bank had committed 135 offences between February 2012 and March 2013.
It is understood, dozen of the Exim Bank customers with
millions of shillings stolen from their accounts each have filed cases at the
Tanzania High Court – commercial division in Arusha chapter after their efforts
to settle the matter out of court proved futile.
Others have decided to lodge their complaints in writing
before the Tanzania Central Bank, which oversees all financial institutions
including commercial banks.
Among the victim Exim Bank customers, include a Tanzanite
dealer, Mr Pendaeli Mollel, who claims to have lost over Tsh800 million
($500,000) to the fraud and theft rackets.
Various documents show that Mr Mollel is a holder of three
Exim Bank accounts of which one is used for depositing foreign currency, the US
dollars, in particular.
Mr Mollel has through his lawyer, Mr Omar Iddi Omar, from
Arusha-based Law Bridge written to ask for the Bank of Tanzania’s intervention
to ensure he recovers his money.
Exim Bank Board of Directors chairman, Mr Yogesh Manek, said
that the management was conducting a thorough internal audit to establish the
exact amount of cash stolen.
“Immediately after the special audit is done, the management
will start making accounts reconciliation with the customers and those with
genuine claims would have their money paid back,” Mr Manek said.
Tanzania is not a lone victim of cyber bank fraud. A 2012
report by audit and advisory firm Deloitte shows that East African banks lost
$48.3 million to fraud in the eighteen months ended June 2012 as they failed to
keep pace with technologically savvy criminals.
Data collected by the Deloitte indicates that banks and
other financial institutions in the region had lost $30 million in 2010 due to
fraud.
However, Deloitte said the figures might be understated, as
financial institutions remain tight-lipped about fraud figures for fear of
reputation damage.
In Kenya, according to the latest data by the Banking Fraud
Investigations Department (BFID), financial institutions reported Ksh1.49
billion ($17.52 million) stolen from customers’ accounts between April 2012 and
April 2013.
Laws
The director of ICT from the ministry of Communication,
Science and Technology in Tanzania, Dr Zaipuna Yona, said cyber fraud in banks
is a serious challenge at the moment, particularly because majority of
countries, including Tanzania, does not have effective laws to deal with the
menace.
Driven by financial motives, hackers have been targeting
financial institutions and by using technological loopholes in these
institutions, some banks have seen themselves lose billions of money.
“Almost each bank in the region are victims of cybercrime,
but none of them will tell you about the cyber-fraud related losses,” said Dr
Yona said.
The Director of Tanzania Public Prosecution (DPP), Dr
Eliezer Feleshi, said cases involving cybercrime are highly complicated in
investigation, prosecution, and adjudication.
This is because thieves do not come to the banks or any
other institutions in person but could be seated far away from their victims
and cause huge losses through the Internet.
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