Top fraud schemes that will threaten Uganda’s banking industry to watch out for in 2024

In 2024, Uganda is grappling with an evolving fraud landscape that poses significant challenges to individuals, businesses, and financial institutions. Understanding the prevalent scams is crucial for safeguarding assets and personal information. Below I share key fraud scenarios witnessed in the country and precautionary measures to mitigate the risks.

a) Forgeries of Collateral Security
One prevalent fraud scheme involves forgeries of collateral security, particularly land titles. Fraudsters collude with insiders and outsiders to stage-manage valuation reports, leading to inflated land values in comparison to loan amounts. This results in significant financial losses for banks as they extend large loans based on fake or overvalued collateral securities. To mitigate this risk, financial institutions are advised to conduct thorough due diligence, including independent valuations, and verify the legitimacy of valuation reports with relevant authorities. Why rush to give out a huge loan? Take your time and tie all the loose ends.

b) Mobile Phone Theft and Mobile Money PIN Exploitation
A rising concern is the theft of mobile phones, followed by unauthorized access to mobile money accounts. Criminals target unsuspecting individuals, stealing phones and subsequently unlocking them to access sensitive information, including mobile money PINs. To safeguard against such incidents, individuals are urged to enable security features such as PINs, passwords, or biometrics on their mobile devices and avoid saving sensitive information within the device. Use mobile phone encryption tools to make it difficult for fraudsters to open stolen phones. At an individual level, when you lose your phone, inform the bank to instantly disable withdrawals from your bank account; and make a police statement. Remember to set mobile phone tracking features to ease the tracing of your phone when lost.

c) Garnish Order Fraud
In another sophisticated non-tech scheme, fraudsters collude with court officials to issue fake garnish orders, allowing unauthorized transfers from dormant or third-party accounts to settle nonexistent debts. Financial institutions are encouraged to implement rigorous verification processes for garnish orders, including direct communication with the purported court issuing the order, to prevent fraudulent fund transfers. Banks should not fulfil garnish orders without independent verification. As the Judiciary automates the court processes, it would be good if they established a central digital registry of all official court documents, to serve as a verification point to reduce such frauds. Participating members would just subscribe to access the official registry of any issued court order across the country.

d) Third-Party Provider Fraud
The trust relationship with third-party providers for banking value-added services has become a vulnerability. Criminals exploit security gaps by attacking these providers, compromising systems, and potentially gaining access to sensitive customer information. Financial institutions must enhance the security protocols of third-party providers and conduct regular audits to identify and address vulnerabilities.

e) Deposit Suppression
Internal threats persist through deposit suppression, where staff fail to record all deposits, leading to financial shortfalls. To counter this, financial institutions should implement robust internal controls, conduct regular audits, and provide comprehensive training to staff on ethical banking practices.

f) Credit Fraud
Fraudsters are adept at exploiting credit systems, taking advantage of loans that are intentionally defaulted. Financial institutions need to enhance their risk assessment processes, adopt advanced credit scoring models, and closely monitor repayment behaviour to detect and prevent credit fraud.

g) Cybercrime
The digital landscape is rife with cybercrime, encompassing phishing, new account fraud, account takeover fraud, and social engineering voice scams. Individuals and institutions alike should prioritize cybersecurity measures, including two-factor authentication, regular security updates, employee training programs, and advanced fraud detection systems.
As Uganda grapples with a diverse and dynamic fraud landscape, individuals and businesses must remain vigilant and adopt proactive measures. Collaborative efforts between financial institutions, law enforcement agencies, and regulatory bodies are essential to creating a secure and resilient financial ecosystem in the face of evolving fraudulent activities.

© 2024 Mr Strategy aka Mustapha B Mugisa, President Association of Certified Fraud Examiners Uganda, Chapter. All rights reserved.

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