How MTN Mobile Money Fraud was Uncovered

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In short
3 different audit documents presented to the court show that MTN management knew of the fraud but didn't know how to stop it. The MTN- IT team then requested Fundamo, the vendor, to resolve the matter. Up until 2014, the mater had not been resolved, the same 17 accounts continued to appear in the system; The MTN IT team didn't close them neither did Fundamo to whom a purported request had been made.

On 21st December 2011, shortly after 7 pm, part of the MTN executive committee gathered for an emergency meeting at their head offices at Nyonyi gardens. Three members of the MTN staff and their CEO had ‘important business' to discuss off an agenda of one item - Mobile money fraud.
 
Prior to the meeting, Richard Mwami, the company's revenue analyst had informed the CEO of ‘unusual' activity on their mobile money platform. Mwami, who had been at golf course hotel hours before, rushed to the meeting to divulge what would spark off a string of investigations into the Mobile Money service.

The meeting, according to records before court was attended by the head of IT systems, Phrase Lubega, Richard Mwami, the CEO  and Barbra Nalukwago who attended for a rather short while and left.  
 
"We were presented with information off an excel file" Phrase Lubega recounts the tale to court. "The journals in question had been highlighted in bright yellow colors and at the bottom was a total of how much money had been lost in the alleged fraud" he adds.
 
The meeting had become the genesis of many revelations which included the failure by the telecommunications company to manage the system vended to them by South African Fundamo Systems, the ability by the system to create new money in the economy and also an alleged trend of employees channeling funds out of the mobile money system.
 
MTN had hired Fundamo Systems in 2011, to provide the software that would run the mobile money service. Already revered as one of the best e-money and mobile banking solution providers, Fundamo, handed MTN the software and it would commence operations on the same.
 
However, six months down the road, the system glitches became evident; journals (a form of order for money) would be created on the back end by MTN staff without proper liquidation procedures. Mwami spotted this in the difference between the general ledger accounts and the bank balance that MTN had with Stanbic. While the general ledger accounts showed shs 17.9 billion, only shs 14.2 billion had been deposited in the bank.
 
The CEO, Thembo Khumalo then ordered an internal audit of the service by an external auditor, Grant Thornton. The audit found problems with how the system was being run. A random survey of 325 active accounts proved that at least 5% of them had unclear documentation but transacted huge sums out of the service. The audit also found that the IT team at MTN did not comprehend the Fundamo platform.
 
Logs provided to court - though heavily redacted from 12th February 2010 to 31st October 2011- show that 17 accounts had unusual mobile money activity and a recommendation was made that the accounts be closed.

3 different audit documents presented to the court show that MTN management knew of the fraud but ‘didn't know how to stop it'. The MTN IT team then requested Fundamo, the vendor, to resolve the matter. Up until 2014, the mater had not been resolved, the same 17 accounts continued to appear in the system; The MTN IT team didn't close them neither did Fundamo to whom a purported request had been made.        
 
Bank of Uganda made a first intervention in 2013, by issuing a long list of guidelines on how the service would be used part of these including risk management proposals. MTN, whose risk management included an Anti-Money laundering system, which according to court testimonies later failed, obliged to these.
 
While the platform continued to grow robustly in a year by 114%, MTN management knew by way of audits that the Fundamo system was insecure but also didn't know how to resolve the crisis. Money in the counts of shs 10 billion was fraudulently and fictitiously created in the economy.
 
The question before court remains, who did this? 
 
These documents are now being used to try six former members of MTN staff accused of fraudulently creating fictitious money within the mobile money system.

They Include Richard Mwami, the former revenue analyst, Patrick Ssentongo , the former head of access/Mobile Money,  Joan Nabugwawo, the former finance manager and Brian Okurut, the former revenue assurance analyst. Also on trial is Angella Ayo, a former cashier, and Eriya Baryamwijuka, a former assistant revenue analyst.

 

Mentioned: mtn uganda mtn

About the author

Raymond Mujuni
Raymond Mujuni is a URN journalist based in Kampala. Mujuni has been a URN staff member since 2013.

Presently a Law student at Makerere University, Kampala, Mujuni started out as a freelancer for URN in 2012.

Mujuni is an investigative journalist, especially interested in Security, Science and Technology. An avid sports fan, Mujuni volunteers with the charity organisation 40 Days/40 Smiles.