Crafty MTN Uganda staff manipulated the mobile money suspense account -where cash from poorly executed transactions is kept - and stole up to Shs 15 billion, The Observer has established.
News of the scam broke only on Wednesday but top managers have known about it since early this year. And as MTN struggles to manage the fallout from the scam, we have spoken to sources within MTN that explained to us how it happened.
Many a subscriber has pressed a wrong digit or entered a wrong figure while trying to send money on MTN's mobile money service. Our sources have explained that when that happens, the system recognises the transaction but does not complete it. Hence, while money is sent, it is usually not received.
Such money is then kept in a suspense account, according to our informed sources. The suspense account system is also used in commercial banks for money whose ownership is not yet clear.
Many subscribers struggle to recover such money because the process is long and tedious. A good number, especially those with small amounts, simply give up. MTN staff monitor this money and the crafty ones eventually make fictitious claims as to whom it belongs.
A statement issued by MTN Uganda said the company was upgrading its mobile money system when the fraudsters took advantage of gaps in the system. Our source also revealed that there are some people who deposit fake bank notes, especially in areas where the dealer might not recognise such counterfeit, leaving the depositor to withdraw genuine money.
In some cases, crafty staff are well aware of the counterfeit notes and work with accomplices, whom they advise on dealers that might blindly accept the fake money. In addition, we have been told that some MTN staff abuse the commission system.
Under this system, the dealers, who operate mobile money kiosks are supposed to earn a commission of Shs 800 per transaction. This commission system is supposed to be automated, but some crafty MTN workers have previously managed to hack in and deny some dealers their commission.
The worst affected commission agents are those whose daily transactions are less than Shs 2m. These dealers also tend to have a poor recordkeeping regime. In many cases they are unable to reconcile their transactions with MTN's because of lack of proper records. Unscrupulous MTN staff exploited this loophole and arrogated themselves the duty of deciding how much commission such dealers should take, often diverting hefty sums for their own benefit.
Industry sources have told The Observer that the scam brings into focus the issue of regulation. The question as to how the mobile money service is to be regulated has been around for a while with no convincing answer. Both Bank of Uganda and the Uganda Communications Commission share some powers to regulate the service. But there has been no comprehensive law or policy on such a critical financial service.
Meanwhile, sources have told us that MTN Uganda is engulfed in tension as a result of the scam coming to light. Yesterday, the company's top management was locked in meetings and the issue was high on the agenda. We have been told that MTN is yet to decide whether to hold its internal audit department responsible for the mess that has so far cost at least three senior staff their jobs. More staff are expected to get the sack as investigations unfold.
The scam was reportedly discovered after an investigation team arrived from South Africa earlier this year, following a tipoff. The team carried out due diligence on the company's mobile money operations and found loopholes. After their preliminary findings, the team recommended a broader investigation.
The MTN Uganda management reacted by reporting fraud to the Police. So far, it's Richard Mwami, the former head of Public Access and Mobile Money, who MTN appears to blame for the mess. Mwami, who was fired in connection with the scam recently, says he is innocent and has sued the company for wrongful dismissal.
MTN statement in full
As previously reported, MTN Uganda detected fraud that led to the loss of Sh 9bn in the Mobile Money business. This amount arose from MTN Uganda balances on income generated from Mobile Money, not customer funds.
MTN Uganda was upgrading its Mobile Money system when the fraudsters took advantage of gaps in the system. Following an internal investigation, MTN Uganda instituted disciplinary and criminal proceedings against a number of its employees.
Those implicated in the fraud, that had not already absconded from duty, were taken through an internal disciplinary process, which led to the dismissal of those found guilty.
The criminal charges process is also at an advanced stage, and MTN Uganda is working with the relevant law enforcement agencies to bring those involved to justice.
MTN as a matter of Policy does not discuss staff employment matters in the press. MTN Uganda wishes to reiterate that customer funds were not impacted by the fraud.
With further upgrades and modifications undertaken to increase its robustness, MTN is confident that it has brought the Mobile Money system to high levels of stability and security.
MTN Uganda continues to introduce new features to enhance the functionality of the Mobile Money service to provide a safe environment for customers to perform financial transactions, and to enhance their experience of MTN Mobile Money. Customers can rest assured that their transactions and money are safe on MTN Mobile Money system!