Tanzania banking sector struggles with escalating fraud

Fraudulent activities in mobile and internet banking remained the most prevalent, causing losses amounting to approximately Sh1.65 billion by December 2023, a slight decrease from Sh1.66 billion recorded at the end of the first quarter of the same year, the consolidated data issued by the BoT on March 5, 2024 indicate.

Although there was a 65 percent decrease in internal staff fraud from September to December, with losses totaling Sh469.39 million, the sector still grapples with significant insider threats.

The reported figure marked an 8.6 percent increase from the beginning of the year, when Sh431.9 million in losses were recorded.

ATM card skimming incidents witnessed a troubling 60 percent increase, reaching Sh159.87 million by the end of 2023.

This figure surpasses the Sh99.64 million recorded in September and was also a twofold increase from the Sh57.46 million reported in March 2023.

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Speaking to The Citizen, seasonal banker and analyst Mr Kelvin Mkwawa sheds light on the evolving landscape and the urgent need for robust preventative measures.

"ATM card frauds are increasingly linked to the surge in e-commerce and online payments, posing a significant risk to customer information," said Mkwawa, adding that the widespread use of tap-in cards has exacerbated the situation.

Mkwawa also highlighted the prevalence of business compromise scams, which involve perpetrators issuing emails to banks and soliciting customer information.

He underscored the insidious threat of account takeover fraud, primarily orchestrated by insiders within banking establishments.

"Dormant accounts are particularly vulnerable targets for these illicit activities," he said.

Regarding the proliferation of mobile banking fraud, Mr Mkwawa elucidated the sophisticated tactics used by cybercriminals.

He said customers may unknowingly receive malware-infected links, facilitating unauthorised access to their financial data.

There is also loan fraud, where fraudsters exploit the identities of reputable companies to secure loans for fictitious employees.

"The adoption of sophisticated security measures is paramount to thwarting increasingly sophisticated cyber threats," he asserted.

Beyond technological safeguards, Mkwawa stressed the importance of enhancing financial literacy among users to bolster awareness and promote proactive measures to safeguard sensitive financial information.

"Banks must also prioritise the recruitment and training of personnel committed to maintaining the highest ethical standards," he said.

For his part, the Chief Executive Officer of the Tanzania Bankers Association, Tuse Mwaikasu, told Mwananchi that he could not comment on the matter because it was not public information.

“Bankers would be more appropriate to address this matter, as they possess the expertise and first-hand knowledge on the subject," said Mwaikasu.

Despite the overall surge in fraud incidences, there was a notable decline in forged checks and TISS (Tanzania Inter-bank Settlement System) fraud by 66 percent, closing at Sh11.3 million in December 2023 from Sh34 million recorded in March of the same year.

Similarly, September saw a 45 percent drop from sh20.9 million, reflecting positive strides in combating certain types of fraud.

Moreover, 2023 witnessed zero armed robbery incidences targeting banks, suggesting a shift in tactics among criminals towards more technologically-driven forms of fraud.