The rush by Saccos to embrace mobile and internet banking as a replacement for the brick and mortar branches is proving to be a weak link in the fight against fraud in Saccos.
A recently released SASRA report covering 2021 and 2022 shows that rogue Sacco staff are breaching internal systems and riding on mobile money services such as M-Pesa to carry out fraud.
“The internal technical staff working within Saccos’ ICT and credit departments have been noted to be the greatest collaborators in perpetuation of fraudulent activities, hence Saccos are called upon to constantly review the adequacy of the internal controls in their ICT and credit functions,” says the SASRA report.
Over the last two years, SASRA’s investigative unit, Sacco Societies Fraud Investigations Unit (SSFIU), has dealt with fraud cases amounting to Ksh232.5 million, with Ksh118.1 million actually getting stolen while Ksh114.4 million is at risk of getting lost.
SASRA data shows that 156 DT Saccos have already deployed mobile money using the traditional USSD code mobile phone services, while 75 DT Saccos have deployed mobile money services using the USSD code, the internet, and App-based money services to transact business.
This is the first time SASRA is making public the kind of cases handled by SSFIU, which was formed in 2020 with the mandate of detecting, preventing and apprehending offenders perpetrating fraud within the regulated Sacco industry.
The unit, currently staffed by five officers seconded to SASRA by the Directorate of Criminal Investigations (DCI), is also mandated to investigate and recommend prosecution of those implicated in fraud.
Most of the fraud cases are either pending investigations, or the inquiry file has been submitted to the Director of Public Prosecutions (DPP) for advice.
SASRA has not named the Saccos caught up in the mess with the view that such disclosures could hurt the confidence of savers in the specific Saccos given that the sector has no deposit insurance.
October last year witnessed a brazen case where someone walked into a commercial bank, opened an account in the name of a Sacco and tapped loans worth Ksh1.16 million.
“An unknown person acting on behalf of a Sacco fraudulently opened an account at a branch of a commercial bank in the name of the complainant, then borrowed money from the Sacco which was deposited into that account,” says SASRA.
In the same year, an internal staff from another Sacco linked members’ savings accounts to an unauthorized mobile number and withdrew Ksh1.6 million.
In June last year, SASRA reported that there was illegal withdrawal of Ksh29.4 million from a certain savings account using unregistered mobile phone numbers. The money was transferred to M-Pesa accounts.
In February the same year, fraudsters used dead members’ accounts and credentials to tap loans worth Ksh24,784, leaving another Ksh486,879 exposed to theft.
In a single weekend in December 2021, four Saccos were hit by fraudulent transactions totalling Ksh22.2 million. The amount was withdrawn from the Saccos’ float and paybill numbers, transferred to other M-Pesa accounts and then withdrawn, leaving the Saccos counting losses.
In April 2021, an unnamed Sacco officer diverted to their account Ksh642,000 meant for M-Pesa floats as well as commissions paid for undertaking M-Pesa business.
In January the same year, members of the public reported to SASRA investigators that they had lost Ksh63 million to a certain unlicensed entity operating as a Sacco.
SASRA says its investigating unit was told the unnamed entity mobilised millions of shillings from members of the public with promises of returns but folded abruptly. The case remains pending.
“Many Kenyans have ended up losing their hard-earned savings to such fraudsters. Consequently, the Authority calls upon members of the public, including private and public enterprises, to cease and desist from undertaking any regulated Sacco business with any entity unless such entity is either licensed or authorised by the Authority,” says SASRA Chairman Jack Ranguma.
In January every year, SASRA publishes in the Gazette and national newspapers the list of licensed and authorized Saccos. It also displays the same list on its website throughout the year for ease of reference by the public.
Additionally, SASRA has rolled out an online complaint reporting and inquiry mechanism to enable members of the public to quickly report any suspicious operations of any entity purporting to be a Sacco or undertaking regulated Sacco business.
By Sammy Chivanga
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