Discussed in the Public Accounts Committee on July 7th, 2015
Home » Meetings » PENSION SCAM: Bank of Uganda faulted for laxity, Cairo International Bank admits wrong doing.
7th July 2015
The Parliamentary Public Accounts Committee (PAC) has faulted
Cairo International Bank for facilitating and abetting fraud in
the Shs.165 billion pension scam and faulted Bank of Uganda for
laxity in its regulatory and supervisory role.
The committee, which is currently probing the financial
impropriety of the pension fund in the ministry of public service
met with officials from Bank of Uganda and the management of Cairo
International Bank to hear their involvement in the pension scam.
Investigations found that bank accounts were opened up in Cairo
International Bank in the names of former employees of the
defunct East African Community or their beneficiaries and their
respective gratuity monies were channelled to the accounts.
Mr Benard Sekabira the director supervision, Bank of Uganda
told the committee that in February 2009, the central Bank issued a
report to Cairo Bank detailing several irregularities which
did not comply with statutory instrument 46, 2010 KYC (Know your
Customer) which requires that every bank must know their customer.
It was revealed that several accounts were opened without
adequate documents, there was no risk profiling, customer’s thumb
prints were not captured and there was no due diligence carried out
by the bank on its customers and telephone numbers on the account
documents were nonexistent among several other irregularities.
The same accounts were used to siphon 165 billion to ghost
pensioners.
The committee heard heart breaking testimonies from pensioners
of the defunct East African Community and Uganda Railways
Corporation, whose photographs were used on fake accounts to
withdraw money purportedly as their pension and gratuity.
Obulo Ogwal 68 years old pensioner told PAC that on 1st
Nov 2012, his photograph appeared in the newspapers against the
name Wandira Joseph Paul. Police at Kibuli Police station told him
that 74 million was paid as his claim and yet he never received the
money.
Ponsiano Odida (72), pensioner from Gulu while
narrating his ordeal said, “….but the misery we the pensioners are
having is very painful. We live in the hands of our children. It is
very painful to see our only sources of money-pension being played
with. My photograph appeared in the papers under the name Loloviko.
I was told that my shs. 81 million was paid to Loloviko. …Am a
miserable man, I live off my children.”
Muloki David (70) testified that his photograph was used to pay a one Sabiiti John Cosmas shs.89 million.
Jimmy Busulwa: (69) said shs. 75 million was paid
to Hannington Basajjakambwe signed for by Mr. Sajjabi, having told
the bank that he was too old and too weak to come for the money.
The Acting Executive Director Cairo Bank Mr Osama Darwish
admitted to the involvement of the bank officials but said they
did so as individuals and all this was done behind the
management’s back.
When asked how such accounts could be opened without the knowledge
of management, and how huge sums of money were withdrawn based on
suspicious withdrawal forms, the Managing Director said he had no
answers.
Mr. Osama however said, “Obviously there was a conspiracy
involving individuals working with the bank and officials from
Ministry of Public service and until the police investigations
started top management was not aware of the ongoing fraud but the
individuals have since been charged and their employment
terminated”
Mr. Osama narrated how Rahma and Sentogo who were working at the
bank at the time had connived with Peter Sajjabi (representing the
former employees of the defunct EAC) to withdraw millions of
money at a time using forged signatures and questionable
withdrawal slips
Hon Ababiku Woman MP Ababiku “Isn’t Cairo bank part of the rot that is robbing people in this country?”
Mr. Osama in response said that, “The scam was like a hammer on the
head and we have since instituted stronger internal control
measures, the quality of staff and all measures to address the gaps
and complying with the regulator Bank of Uganda especially with
the instrument KYC.”
The PAC chairperson Hon Alice Alaso said that, “Cairo
International Bank deliberately facilitated the pension fraud
by allowing money to be siphoned through their system and leading
to billions of tax payer’s money being to the lost.”
The Public Accounts Committee also faulted Bank of Uganda
for failing to regulate and supervise commercial banks leading
to such cases of fraud.
Bank of Uganda defended itself saying they did their role and took
action against Cairo bank including downgrading the bank and
directing it to appoint a new board after repeated
irregularities and lapses and subjecting the new board and top
management to the BoU fit and proper assessment.
“Do you consider that the action taken by Bank of Uganda was
adequate to avert this crisis beyond directing for the change of
the board?” inquired the PAC chairperson Hon Alice Alaso.
The deputy governor Bank of Uganda, Dr. Louis Kasekende said that
from the regulatory point of view BOU can only strength the
management and control of the board.
Hon Alaso” What is clear hear is that we can’t continue leaning on
BoU to protect us. We have old pensioners whose money was taken
because of the laxity of the bank in carrying out its supervisory
and regulatory mandate.”
Dr. Kasekende reiterated that Cairo bank only controls 0.6% of
the market share and that BoU is satisfied with the risk management
in the financial sector as a whole and the central bank’s
supervision and regulation should be commended. He asked that
conclusions should not be drawn simply based on the experience of
Cairo Bank.
Dr. Kasekende, “We put in place an effective system in place that
reduces the risks but does not completely wipe out the risks”
However the committee members noted with concern the failure of
bank of Uganda as a regulator to stem the loss of the pension
funds.
The committee also issued summons for Mr. Sajjabi, Oloka,
former employees of Cairo bank Sentongo and Rahma and the former PS
ministry of Public Service Jimmy Lwamafa to appear and answer for
their role in the fraudulent transactions.
