Banking fraud landscape – Uganda 2024

One of the biggest challenges for the banking sector in Uganda in 2023 was fraud. We had major litigation points in this area, and some cases were internally handled and settled. Here is a projected landscape survey from an analysis of the resolved cases.

1. Cyber fraud projected to keep upward trend. There was notable growth in fraudlent transactions arising from identity thefts, customer negligence, failed eKYC and customer due dilligence systems. As digital banking continues to grow, so will this risk category.

2. Cards fraud mostly migrating to Card Not Present/CNP. Growth of electronic commerce and the use of convenient card options such as “tap and go” on the retail side lead to exposure of credential information such as cardholder’s names, account numbers, CVV security codes, and card expiration dates. With such data exposure, the physical card is not necessary to effect fraudulent transactions. Security tools like 3D-secure are recognized as effective countermeasures.

3. Forensics & investigations capacity budgets to continue growing. Resolution of such cases is complex and requires continuous skilling, training and simulation exercises/tests. It is anticipated that in-house budgets for these activities will continue to grow as Boards and management seek for solutions to safeguard customer assets and public deposits.

4. Internal actor collaboration becoming more syndicated. One of the biggest risks in fraudlent transactions is insider risk. With adoption of third party vendors and service providers such as fintech partners, points of contact will likely result in more layers of syndicated internal frauds. A few notable cases have been noted with telcos and bank integrations, consisting of fraudlent misconduct such as tipping off, data leakage and wilful blind-knowledge.

5. Increased regulatory scrutiny. The Minister of Finance enacted the National Payment Systems (Consumer Protection) Regulations in 2022. It is also anticipated that the Bank of Uganda Financial Consumer Protection Guidelines 2011 will be reviewed to cover emerging issues such as unconscionable/unfair exclusion or limitation of liability clauses in fraud matters.

6. Traditional areas of fraud such as land registry double titling, fictitious special certificates of title, procured valuation reports, documents fraud, spousal frauds/impersonation, procurement frauds and fraudlent dealings/connivance in administration of deceased persons estates will remain flagged, and most banks have built experience and internal capacity to identify and manage these old fraud types.

Economic activity is predicted to rebound in 2024 facilitated by oil and gas FDI, growing Internet penetration, political activity as we build up to party primaries, real estate/construction, public infrastructure and government spending. Do not hesitate to reach out should you encounter any challenges in the process of financial sector intermediation.

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Silver Kayondo - Lawyer UgandaAs a dual-trained Ugandan and South African lawyer, my focus is on assisting businesses, innovators and investors in shaping the trajectory of the Fourth Industrial Revolution (4IR) on the African continent, by deploying the skills, knowledge and experience accrued over time.

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