Ugandan legislators are exploring the role of cryptocurrencies in connection with pyramid scheme frauds that are often found in the country, local newspaper PML Daily reported on Feb. 4.
While legislators are moving forward with a proposal to criminalize Ponzi schemes, cryptocurrencies may come under fire as well.

Speaking at the parliament, the State Minister of Finance David Bahati revealed that the government has established a task force to explore cryptocurrencies and their potential applications in Uganda. The task force will also focus on global industry 4.0 trends that could result in major developments for the country and region.

Though Uganda’s attitude to cryptocurrencies is one of the more welcoming in the region, its citizens have fallen victim to a number of scams.

The government’s latest initiative seeks to educate citizens and discourage them from investing in Ponzi schemes. A wider ban is also being proposed, as Bahati explained:
“We are also discussing with the Internal Affairs Ministry to ban such schemes. The challenge is that operators of such schemes register as financial institutions but when they get on the ground, their operations are different.”
Cryptocurrencies are often used by the fraudsters to collect the money, which put them under the government’s radar:
“We have continued to advise the public to desist from investing in cryptocurrencies since they are yet to be supervised and regulated in Uganda. We have, therefore, strongly encouraged the members of the public to do their business transactions with only licensed financial institutions.”
Bahati also revealed that the Ministry of Justice is currently amending the Penal Code Act to criminalize Ponzi schemes, while also adopting clear guidelines to correctly identify the owners of a newly registered company.
Furthermore, the country’s Anti-Money Laundering Act is being modified to include virtual assets providers under the regulation’s umbrella.
“This will bring virtual assets service providers including providers of cryptocurrencies to be brought under the purview of the Financial Intelligence Authority,” explained Bahati.
However, parliament member Mwine Mpaka accused the government of protecting the creators of Ponzi schemes:
“The Financial Intelligence Authority submitted a list of all companies involved in this fraudulent business and the Ministry of Finance knows them but they are quiet.”
Mpaka then revealed that he knows a bishop involved in the business, noting that he is “heavily guarded.”
The Parliament’s speaker Rebecca Kadaga then noted that the issue of pyramid schemes had been often raised, but no action was taken. The latest initiative may have been prompted by a petition from the victims of the Dunamiscoin scam, submitted in January.
The scheme is alleged to have stolen approximately $2.7 million from investors and employees. The company promised 40% returns over the initial investment.


Ponzi Schemes and Scam Activities During and Post CORVID-19

 
https://cmauganda.co.ug/ug/dnews/34/Ponzi-Schemes-and-Scam-Activities-During-and-Post-CORVID-19.html

Thursday, 21st May 2020

As the world grapples with the fight against the deadly CORVID-19 pandemic which has not only claimed lives and affected human livelihood, but also ravaged economies, the Capital Markets Authority (CMA) continues to stand with you all in this fight and encourage the capital markets fraternity to play our individual roles alongside what our Government is doing to manage the situation. Additionally, we would like to re-assure all our stakeholders and the general public that we are continuing to monitor all activities in Uganda's capital markets to ensure order, fairness and transparency. Our primary objective remains protection of investors at all times.

Given the likely economic impact on business enterprises and the economy, a number of people are bound to be desperate for survival owing to the spillover effects of the epidemic which include loss of jobs and reduction/ loss of incomes. The Authority is aware that during such challenging times, unscrupulous individuals tend to take advantage of the unsuspecting public and devise schemes to defraud them of the limited savings they have left to cater for their basic needs. 

Such devious characters are likely to emerge with "too-good-to-be-true" financial schemes which promise quick recovery and abnormally high returns on investment.Usually, they will ensure that their first clients are rewarded handsomely so that they serve as testimony to lure more people to invest. Unfortunately, once they have collected a substantial amount of money from various individuals,such ponzi schemes will fail to meet their obligations and consequently, vanish with people's savings.

We strongly caution the public to be mindful of such schemes, especially during and post CORVID-19 and, avoid falling prey to such selfish characters whose interest is to take advantage of already distressed people.

So,what are some of the red flags that could indicate that a scheme may be looking to defraud you?

  • If the marketing of the scheme is too aggressive, i.e. making regular cold calls, numerous unsolicited sms and Whatsapp messages, etc; and yet the firm's representatives are not willing to address all the queries you have before you invest;
  • If the scheme claims to be licensed or approved by an Authority or agency unknown to you and cannot produce proof that they are licensed to operate in Uganda;
  • If the return on investment is "too good to be true". For example, if they promise returns which are way above what the rest of the market if offering on the same product; or if they promise high daily/ monthly returns or dividends
  • If what you are buying or investing in sounds ambiguous and does not make sense to you;
  • If they ask you to make a down payment - usually an affordable sum of money so that they can register you or send information about their product;
  • If the scheme sounds like it is a causal-related scheme that aims to help disadvantaged or underprivileged people;
  • If the scheme's major claim to legitimacy is their affiliation to influential persons in the political, religious or business space;
  • If the firm /scheme claims to be registered outside Uganda and has no clear operations as per the Ugandan laws;
  • If the scheme operators use force or intimidate you into investing in their scheme products.
Therefore,before investing through any scheme, always endeavor to establish that:

  1. The sponsor of the product or security is licensed or approved by CMA or any other clearly known regulatory body in Uganda. An up-to-date list of firms/ schemes approved by the CMA can be accessed from our website, www.cmauganda.co.ug;
  2. The sponsors or advisors provide you with balanced information about their product, which includes both the advantages and disadvantages of undertaking the investment;
  3. While investing in any product, avoid making direct payments to the scheme representatives. All deposits should be made through traceable financial channels such as the bank,mobile money, etc;
  4. If you are not sure about a scheme's legitimacy, contact the CMA or any other financial sector regulator to confirm its existence before you place any investments with them;
  5. Always seek investment advice from the CMA licensed investment advisors, a list of which can be accessed from our website.
CMA also reminds existing investors in securities to be cautious of the decisions they take during this period especially with regards to buying and selling of securities. As a result of the pandemic, stock prices may be affected. It is therefore imperative that before making the decision to trade, one seeks sufficient investment advice from our licensed intermediaries and ensure to sign a sell order or buy order form (or its equivalent) before any trade is executed on your behalf.  

Investors in Collective Investment Schemes (CIS) or unit trusts that are approved by the CMA are also advised to seek ample investment advice before any trade is executed by their CIS Managers.

TO CONTACT US;
Email: ms@cmauganda.co.ug or info@cmauganda.co.ug
Twitter: CmaUganda
Facebook: CMA Uganda

From ‘ebicupuli’ cheques to ATMs: The changing faces of financial fraud

https://www.monitor.co.ug/News/National/ebicupuli-cheques-to-ATMs-financial-fraud/688334-5414620-uq5i6/index.html
Saturday January 11 2020
 
Withdrawal. A man withdraws cash from an ATM.



By Tom Malaba
 

Audit advisory firm Deloitte’s 2013 Financial Crimes Survey report indicates that Uganda loses up to nearly $10 million (about Shs24.9b) to fraud every year.

Mr Robert Nyamu, the director of forensic and litigation support at Deloitte, says the fraudsters target cheques and cash, and more recently wire fraud, targeting real-time gross settlement systems (RTGS), electronic funds transfer (EFT), and point of sale EFT.

Uganda financial system comprises both regulated and non-regulated institutions that wire huge amounts of money through RTGS and EFT.

RTGS and EFT are used to transfer money from one bank to another or within the same financial institution in the shortest time possible.

In its report, Deloitte blames the increased cases of fraud on financial institutions’ failure to put in place high-tech controls that match the kind of innovative products put on the market.
“We feel a lot needs to be done because as more innovations are rolled out, there is need to elevate the security systems to make it more challenging for fraudsters to get their hands on depositors’ money,” Mr Nyamu said.
Regulation
Uganda’s regulated financial segment comprises 15 commercial banks, seven credit institutions, three microfinance deposit taking institutions, insurance companies, and the stock exchange. The Central Bank is mandated to regulate, supervise and discipline financial institutions in order to maintain their safety.

Deloitte says Uganda tops the list of fraud cases perpetuated through cheques, with 50 per cent, compared to Kenya’s 44 per cent, and Tanzania’s 14 per cent.
Uganda also leads in mortgage and accounting and financial statements fraud. The survey reveals that cash theft still tops the list of fraud with Kenya posting the highest rate of 72 per cent, Tanzania having 71 per cent, and Uganda indicating 67 per cent.
Cheques remain Uganda’s most commonly used instrument in financial settlement and otherwise.
But, the spokesperson at the Directorate of Criminal Investigation (CID), Mr Charles Twine, says besides cheques, RTGS and EFT, there are many more other financial fraud cases in the country. He defines financial fraud as “any attempt” to illegally gain financial advantage.
Bank of Uganda says frauds take various forms, ranging from alteration of cheques and or counterfeit to skimming or cloning of bank credit and debit cards.
Mr Twine says: “These frauds are widespread. We have investigated and prosecuted many people.”
He cites land fraud, procurement fraud, and embezzlement causing financial loss.
Mr Twine cites other computer-aided frauds as Crypto-currency, in connection with which a one Kalumba has been arrested. The scheme has left thousands conned of their hard-earned cash.
Records
Police records indicate that between 2002 and 2006, another fraudulent scheme, Caring for Orphans and Widows (COWE), defrauded people in western Uganda.
A few years later, another fraudulent scheme, Dutch International, emerged on the financial scene. By the time the authorities got to the bottom of the deceitful scheme, unsuspecting investors had lost between Shs20b and Shs30b.
A one Balikoowa and Nkadde, were arrested and charged in court over the shenanigans.
The latest questionable financial scheme that is extracting money from people is now Cryptocurrency. Even when thousands have fallen victim to such deceitful schemes, many more such groups keep flooding the market, promising their clients handsome return.
Strangely, more people continue to invest in them, despite warnings from Bank of Uganda (BoU).
On August 29, 2018, BoU warned the public against Ponzi schemes promising high returns, with little risks to investors.
“If a business guarantees you high returns with little risk to investments, it is false,” BoU warned.
But this did not deter more such fraudulent schemes from emerging and defrauding the public. Prominent among the schemes were D9 Club, Oryx coin, One coin, Dag coin, Savannah coin, Padre Pio, and Bitmex. A senior police detective familiar with operations of the fraudulent schemes said they are created deliberately to defraud the unsuspecting public.
“It is the same people, all they do is to change their modus operandi but continue to defraud,” the officer, who declined to be named, told this newspaper.
Saturday Monitor also learnt that investigating financial fraud is not easy, with highly proficient police officers tasked to trace for evidence.
Training officers
In a bid to bolster this team in July last year, the Directorate of CID, conducted a three-week fraud investigations course to empower its officers.
The officers were drilled to appreciate the government automation payment system where requisition, payment and voucher are all automated,” Mr Twine says.
He says the CID department has also equipped IT experts with investigative skills to deal with electronic fraud.
“Frauds are widespread and we have also investigated and prosecuted many people,” Mr Twine says, adding that the detectives’ biggest nightmare are the rich beneficiaries of fraud, who can afford to disappear abroad when pursued.
Another senior police detective familiar with fraud says: “The work of any fraudster is to create a false market. So that he gives value to something worthless and gets pay for it.”
He cites wild goose chases of World War stoves brought into Uganda by the war veterans, and were said to contain gold, and many people lost money as they paid to get hold of the golden stoves. He also says similar frauds were prevalent in the 1980s and 1990s, when people were duped into paying money in the quest of snatching bright and precious gemstones that very old cobras would allegedly spit out as they trapped insects.
“Uncertain of their safety with snakes, the risk takers would abandon the scheme and lose money to fraudsters,” he recalls.
But there have been more evolving clever frauds involving banks. For example, some fraudsters forge an account holder’s signature and withdraw money from the victim’s account using forged identification. Also some unscrupulous civil servants hold Bank of Uganda cheque meant to pay a supplier, create a duplicate cheque and cash it before releasing the genuine cheque to the cheated supplier.
Besides, fraudsters in Kampala would intercept International cheques either through postal mail or in connivance with criminal gangs abroad.
“They will use the cheques to pay for goods overseas, and when the suppliers bank the cheques, they would realise the cheques had been stolen,” says the detective.
Fake travellers cheques, popularly known as ebicupuli, were also used to defraud suppliers of good and service. The original amount of money would be rubbed off the cheque with special ink and replaced with a bigger amounts and used to pay for goods abroad, with many companies in the Far East falling victim.
The best known case was of former Kampala City mayor, Mr Nasser Sebaggala, who was arrested in New York in June 1998.
He was convicted of eight counts in connection with bank fraud and transfer of altered documents and cheques into the US. He was sentenced to 15 months.
Mr Twine says despite the many legal and regulatory regimes such as the Anti-money Laundering Act, 2013, the Computer Misuse Act, 2011 and the Capital Markets Act, 2011 to fight fraud, the vice still persist.
5 signs an ‘investment opportunity’ may be Ponzi scheme
1. It guarantees you high returns with little risk of losing your investment. A good general rule to follow is; if it sounds too good to be true, then it is false.
2. It promises you consistent returns regardless of the market conditions.
3. The investment strategy or business activities are described as too complex for investors to understand, or top secret.
If a business idea cannot be explained, it is suspicious
4. The company or proprietor running the scheme focuses all their energy into attracting new clients to make investments.
Without a constant flow of new investments to continue to provide returns to the scheme owners and older investors, the scheme falls apart.
5. Both old and new clients face difficulty trying to remove their money from the scheme.
Many times, it has already been spent on paying the proprietors or other investors.


Factors abetting financial crime
• Abundant liquidity in industry, weak or inadequate financial crimes controls
• Manipulation of data and evasion of IT controls
• Diversity of products not matched with strong controls
• Inability to punish fraudsters
• Pervasive use and advancement of technology with weak security controls
• Lack of prosecution or thoroughly investigated due to lack of personnel and financial capacity of the authorities
Financial fraud
Bank frauds
• Cheque Frauds
• Counterfeit
• Forged Instruments
• Alterations on Instruments
• Drawn on closed accounts
• Credit and Debit Cards (plastic) Frauds
• Deposit Slip Scam
Types of cheque frauds
• Counterfeit [cheque not written or authorised by legitimate account holder].
• Forged
• Altered
• Drawn on closed account Counterfeit
Sources of cheque fraud
• Fraudulently opened bank accounts
• Thieves/robbers breaking into homes/offices or cars
• Waste cheques from bank archives by bank insiders
• Intercepted government / parastatals or company cheques payable to genuine suppliers/service providers
• Intercepted cheques written using acronyms e.g URA, CAA, URC, KCC etc.
• Counterfeit cheques with advancement in colour copying and desktop publishing. Many experts say this is a growing source of fraudulent cheques.
• Dollar cheques / travellers cheques • Eichupuli’, mainly obtained from outside the country but also intercepted from international mail.