Kenya’s Sacco regulator sets up unit to police activities, probe fraud

By Anthony Kitmo

An anti-fraud unit has been established to serve Kenya’s Savings and Credit Co-operative Organisations (Saccos).

Set up by regulator Sacco Societies Regulatory Authority (Sasra), the Sacco Societies Fraud Investigation Unit (SSFIU) will probe and address increasing graft cases in the sector.

Sasra has signed a memorandum of understanding with the country’s Directorate of Criminal Investigations (DCI) to formalise the establishment of the unit. It will be similar to the Anti-Fraud Unit at the Central Bank of Kenya, which polices activities of banks.

The SSFIU is part of improved corporate governance in the sector in line with Sasra’s strategic plan for 2018 to 2022.

The unit comprises five specialised officers seconded from the DCI, and is functionally supported by Sasra’s technical staff.

It will be housed within Sasra’s offices, and is expected to collaborate with the authority to develop and implement a robust market surveillance and monitoring mechanism to prevent frauds or disrupt planned fraudulent activities.

According to the 2021 Financial Sector Stability report by the CBK, Kenya’s Sacco sector lost about $10,600 in 17 months to March 2021, with attackers targeting weak controls of the systems given minimal verification of members’ identity.

The report recommended all Saccos to review and enhance their IT security, including their service level agreements to ensure that those affected are compensated in the event of an attack where the vendor is culpable.

Supervisory framework

Sasra chair John Munuve said the establishment and operationalisation of the fraud investigations unit will complete the supervisory framework of Saccos in Kenya, which has been largely reliant on prudential supervision.

‘’We view this as an important and serious commitment to work closely with DCI in transforming the Sacco subsector. The establishment and operationalization of the Fraud Investigations Unit, came at the most opportune time, to complete the cog of the supervisory framework of SACCOs in Kenya, which was initially largely reliant on prudential supervision,” Mr Munuwe said.

DCI representative John Gathomo said Saccos face operational risk, arising from cyber-attacks through their software vendors, which remains high as the use of technology increases.

“It is important to stress that in today’s economy, financial transactions are heavily conducted using technology and other digital services. And Saccos have not been left behind in this,” said Gathomo. In July 2019, at an event marking the International Co-operatives Day, Kenya’s President Uhuru Kenyatta called for the establishment of a fraud investigation unit within Sasra to secure savings of members.

Prosecution

Munuve said the SSFIU will take up identified cases of fraudulent conduct during prudential supervision and investigating the same. In instances, where criminal culpability is proven, and with concurrence to the relevant prosecution agencies, he added that the Unit will ensure that the culprits are prosecuted and brought to justice.

This article originally appeared in The East African.

Photo: File.