Financial Crime World

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Identity Theft and Financial Crime on the Rise in Uganda

A new report by the Uganda Bankers’ Association (UBA) has revealed a significant increase in identity theft, impersonation, forgery, and cash suppression in the country’s banking sector. According to the report, these forms of fraud accounted for 42.4% of all scams and related incidents in the period ended December 2022.

Causes of Rise in Cyber Fraud

The UBA report attributed the rise in cyber fraud to increased reliance on digital payment and transfer of money, as well as growth in collaborative services between banks and other players such as mobile money companies. The report noted that cases of wallet and internet banking account takeovers rose significantly during the period, with scammers exploiting third-party system vulnerabilities to compromise customer accounts.

Types of Scam

Other forms of scam under impersonation and identity theft included:

  • Online card fraud
  • Third-party risk posed by aggregators
  • Loan fraud

Cyber fraud payment increased during the period, becoming one of the most common categories of scams, constituting 31.9% of the total industry fraud.

Successful Fraud Prevention Measures

Despite the increase in cyber fraud, the report noted that less than 3% of attempted frauds were successful, suggesting that 97% of attempts were blocked or foiled. This was mainly due to increased investment in control frameworks and the implementation of mitigation measures by banks to create fraud guard systems.

Launch of Cyber Security Operations Centre

The UBA is also set to launch a Cyber Security Operations Centre, which will provide several aspects of cyber defenses, including:

  • Setting up and management of cyber security centers
  • Mapping types of cyber risks, methodologies, and trends
  • Cultivating, fostering, and reinforcing collaboration in cyber security risk management

Banking Sector Performance

In other news, the banking sector’s profitability dropped by 10.6% in the period ended December 2022, due to a tight economic environment characterized by high inflationary pressures, Covid-19 spillover effects, and runaway commodity prices.

  • Banking assets grew by 11.2%, driven by an increase in marketable trading securities and growth in loans and advances.
  • Customer deposits increased by 12% from Shs28.2 trillion to Shs31.6 trillion, while loans grew by Shs19.9 trillion, representing a 12.5% increase.
  • Banks reported a general decline in provisioning for bad and doubtful debts, but the performance remained fragile with increases and reductions registered across the sector.
  • Only three banks posted losses compared to eight in 2021, despite a more challenging economic environment.