Government Officials and ICT Staff Involved in Multi-Million Dollar Scam
A recent investigation has uncovered a massive fraud scheme involving government officials and ICT staff from the Accounts Assistant level up to senior officers. The scam, which was carried out using the Integrated Financial Management Information System (IFMIS) based on an EPICOR computer network, resulted in losses of MK6.9 billion (US$15.5 million).
How the Scam Worked
The system allowed users to create unique user names and passwords, which were only known to them. However, ICT personnel did not have access to these passwords and could not perform any payment operations as they did not have the necessary rights.
Between April 1st and September 30th, 2013, some accounts officials in Lilongwe connived with ICT personnel to upload fake funding and generate payments amounting to MK6.9 billion (US$15.5 million) in favor of 39 businesses for goods and services that were not provided.
The Scheme
The scheme involved selected legitimate suppliers of goods and services, mostly construction companies, who withdrew the funds from banks soon after the cheques were cleared. This led to a significant surge in withdrawals at commercial banks.
A total of ten banks were used by the criminals to defraud the Malawi Government with 104 cheques. The transactions were deleted from the IFMIS server with the assistance of ICT personnel, but the system suppliers later traced the deleted transactions through a remote backup server.
Fake Cheques Scam Emerges
Another emerging trend is crooked individuals starting up businesses with similar names to existing organizations or businesses, intending to divert cheques. These individuals collude with staff from targeted organizations to access cheques, which are then altered to fit their accounts.
A recent case study involved a business owner who registered a company with a name similar to a trendy technological company in Blantyre, Mzansi Technologies. The imposter opened an account at Bank M and deposited three cheques drawn on different banks by purported clients. The bank personnel noted alterations on the cheques, especially the name “Mzanti”.
Red Flags
- Registration of a business name similar to an existing organization
- Collusion with staff from targeted organizations
- Alterations on cheques
- High volumes of merchandise with cheques and cash seemingly coming in from everywhere
Consequences
The authorities have arrested several individuals, including government officials and ICT personnel, and are currently pursuing ongoing cases at the courts of law.
This scandal highlights the need for increased vigilance and cooperation between government agencies, banks, and businesses to prevent and detect fraud. By being aware of these red flags, we can work together to prevent similar scams from emerging in the future.