Banks urged to enhance measures against rising fraud

There’s a dramatic rise in loan fraud, which surged to 46.5% as of June, up from 23.3% in March 2024

Kampala, Uganda | PATRICIA AKANKWATSA | Uganda’s banking sector is confronting a significant increase in fraud incidents, prompting experts to call for more stringent measures to address the escalating threat.

Julius Kakeeto, the chairperson of the Uganda Bankers’ Association (UBA) said during the 2nd Annual Financial Fraud Forum hosted in Kampala’s Mestil Hotel on July 25, that there is an urgent need for financial institutions to bolster their technological, regulatory, and legal frameworks to tackle this pressing issue.

Kakeeto revealed that there’s a dramatic rise in loan fraud, which surged to 46.5% as of June, up from 23.3% in March 2024. In addition, various digital financial crimes – including card, mobile, and cyber fraud – continued to pose substantial risks.

He said despite a temporary decline in digital fraud rates to 31.6% from 45.2%, other forms of fraud such as impersonation, identity theft, and forgeries still account for 21.9% of cases, down from 31.4% earlier this year.

“There is an urgent need to strengthen technological, regulatory, and legal frameworks to bolster the sector’s resilience against fraud,” Kakeeto said.

“Equipping financial institutions and supporting law enforcement with advanced tools and robust measures can effectively deter perpetrators and mitigate losses.”

Organisations lose 5% of their revenue to fraud

This comes as the Association of Certified Fraud Examiners (ACFE) Global Report 2024 indicates that organizations globally lose approximately 5% of their revenue to fraud each year, with a total loss of $3.1 billion reported from 1,921 cases.

In Uganda, the 2023 Annual Police Report highlights a staggering loss of Shs 1.8 trillion due to economic and corruption-related crimes, with only Shs 80 billion recovered.

Dr. Michael Atingi-Ego, the deputy governor at the Bank of Uganda, said there’s need for a proactive approach to fraud prevention.

He advocated for a shift from traditional detection methods to more advanced strategies, including rigorous customer and employee due diligence.

“As staff transition between institutions, thorough checks are crucial,” Atingi-Ego said. He also stressed the importance of enhancing financial literacy and public awareness, calling for greater collaboration among financial institutions, regulatory authorities, and consumer advocacy groups.

Isaiah Mutungi Igumira, the head of legal at the Criminal Investigations Department in the Uganda Police Force, noted that the complexity of financial crimes often requires specialized expertise.

“The rapid evolution of technology means that criminals frequently stay ahead of law enforcement,” he said, advocating for increased training and the establishment of specialized units dedicated to financial crime investigations.

The Principal Judge, Flavian Zeija, meanwhile, called for comprehensive legal reforms to address emerging fraud trends, including updates to laws governing cybercrimes, electronic transactions, and data protection.

“Specialized training for judges and prosecutors on digital forensics and cybercrime investigations is essential,” she stated. “Strengthening the legal framework and enhancing judicial capacity will provide a more effective deterrent against fraud.”