Uganda: Banks Want Harsher Punishments for Fraudsters

19 February 2024

The Uganda Bankers' Association (UBA) has proposed stiffer and painful penalties for individuals involved in financial fraud.

UBA, an umbrella body of financial institutions, say it has noted with concern a rise in cases of fraud in Uganda's financial services sector.

The Financial Intelligence Authority (FIA) report released in June 2022 showed that fraud was rampant and increasingly sophisticated.

The report indicated that cyber frauds accounted for over 50% of the high value fraud cases under investigation and annual fraud losses, more than doubling over the period 2020 to 2021.

On Monday, UBA chairperson Sarah Arapta revealed that recently, they contracted a legal firm to review the legal framework for prevention, deterrence and remediation of fraud within the sector.

She noted that the framework, if approved by the policymakers, would see convicts of financial crime or those blacklisted face full enforcement of the law.

"We would like to be in a position where if one is convicted of serious financial fraud and black or red listed, no financial institution in Uganda can maintain an account for you or transact with you in addition to the other cross-border and international sanction imposed on such fraudsters," Arapta said.

The banker was speaking at the launch of two newly-developed banking frameworks; The banking industry guidelines on mitigation of fraud (BIGF) and the revised industry code of conduct and ethics (COC), at Sheraton Hotel, Kampala.

The BIGF aims to tackle the pressing issue of fraud by developing comprehensive guidelines on incident reporting and information sharing as well as formulating a strategic roadmap for the industry to effectively combat fraudulent activities.

The BIGF framework shall also entail maintenance of two categories of listing of persons or entities involved in fraud namely; the Grey list for fraud suspects, blacklist for confirmed or convicted fraudsters.

On the other hand, the COC encompasses the essence of professionalism, ethics, and responsible conduct for all all staff of UBA member institutions and the secretariat.

It also entails punitive measures against banking staff who breach confidentiality obligations or collaborate with fraudsters to share information or compromise access to systems.

Speaking at the launch, the Deputy Governor, Michael Atingi-Ego noted that the operationalisation of the frameworks comes at a critical time when the banking industry is facing the perversive threat of frauds fueled by technological evolution.

"I think they (frameworks) initially tie in together and also, I want to agree that the launch of these two documents at the same time is very, very important because they speak to one another." Atingi-Ego said.

He added, "So the initiative that we have just undertaken is critical or it's a critical stepping stone towards the strengthening the bedrock of trust and confidence that underpins our financial institutions."

He further observed that frauding the banking system fundamentally undermines customer trust, the principle the industry relies on, thus the critical need to combat the vice.

"When fraud occurs, it erodes its trust, living individuals feeling exploited and vulnerable. Furthermore, the far reaching consequences of crowds in the banking industry extend beyond immediate victims. It distorts market mechanism, diverts crucial resources from productive investments, and can even cascade across entire communities, leading to economic hardships and social unrest throughout." the Deputy Governor remarked.

Wilbrod Owor, the UBA executive director said financial fraud is rampant in Uganda because the perpetrators are more organized, and called for more stakeholder collaborations in the fight against the vice.

"It (fraud) is also planned, strategic. They (fraudsters) grow strategic plans, long term plans, short term plans, they invest, they look for capital. This is serious business and that means that for us to stay ahead of it, we must even run faster." Owor said.

He noted that the launch of the two documents is a manifestation of their commitment to mitigating fraud as well encouraging collaborations to ensure a safer and trusted financial industry.

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