PEN­SION SCAM: Bank of Uganda faulted for lax­ity, Cairo In­ter­na­tional Bank ad­mits wrong do­ing.

 

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.

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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 1^st 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.