Fraud Management Role in Financial Industry
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Want to understand the impact of fraud in financial services sector in Uganda? In the presentation, find analysis of the impact of fraud on banks in Uganda based on their business model. Fraud affects the cost to income; and revenue mix. It affects pricing of banking products.
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Fraud Management Role in Financial Industry
- 1. be transformed 9/22/2023 Fraud Management in Financial Industry and the Individual Role Mustapha B. Mugisa, Mr. Strategy
- 2. be transformed The top 4 broad risk areas of concern 9/22/2023 2 Cybersecurity risks Fraud & compliance risks Incident & Crisis mgt (BCP) ERM Strategy Enterprise Objectives at risk
- 3. be transformed The cost of fraud… 9/22/2023 3
- 4. be transformed Cost of cybercrime (Uganda Police rpt) A lot of money is invested in trying to recover the big sums of lost money which is not on record 248 of the reported cybercrime cases led to a loss of 11.4B Ugx. 51 Mn Ugx.11.4 Bn Classified Information cyber crime costed them over 13.4 billion Ugx. * Ugx. 171.1 Bn 0.4% Recovered 99.6 0% Cyber loss 2019 Confidential Recovered Our frontline projects 0.4% 99.6% Source: Project Frontline Uganda 2020 published by www.summitcl.com
- 5. be transformed Fraud drives CTI higher… 5 Aspiration zone CTI<40% & NII contribution <28% Cost to Income Ratio (%) NII industry Avg. of 26% Medium risk : Low CTI but high dependence on NII. Medium to High risk: 7 banks CTI Industry Avg. of 81.4% Key: Size of Ball = FY 2019 Assets (Audited Financials) Source: Published Audited financials Citi CERUDEB UBA MCBL Post HFB StanChart SBU BOA Absa Pride Brac DFCU GT FINCA BOI Equity BOBU FTB ECO Opportunity UGAFODE EFC Yako DTB ABC NC 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 32% 42% 52% 62% 72% 82% 92% Contribution of NII tot Total Revenue Source: summitBI Uganda Banking Sector Review 2020 Report by www.summitcl.com
- 6. be transformed be transformed 6 38% 21% 38% 38% 46% 21% 29% 38% A B C D E F G H Common causes of cyber fraud… A Weak and or compromised credentials B Misconfiguration C Trust relationships D Missing or poor encryption E Technical vulnerabilities including zero-day exploits, trojans, cross-site scripting, session high jacking, and man- in-the-middle F Ransomware G Malicious insiders and or former employees and service providers H Social engineering including phishing Source: Project Frontline Uganda 2020 published by www.summitcl.com
Editor's Notes
- Cybersecurity risks – do you leverage IT solutions? When did you last conduct IT security risk assessment? Fraud risks – is your fraud risk management program effective? Crisis management and business continuity ERM - General risk management including strategy and compliance risks – how mature is your overall ERM? Covers all the processes
- Fraud is a global problem affecting all organizations worldwide. Because occupational fraud is frequently undetected and often never reported, it is difficult to determine the full scope of global losses
- According to the Uganda Police annual crime report for 2019, a total of 248 cybercrime cases were reported during the year compared to 198 cases reported in 2018. These cybercrimes resulted in a loss of Ugx. 11.4 billion in 2019 of which Ugx. 51.8 million was recovered. According to our Frontline projects at our premium clients in the past 12 months, on average over 13.4 Billion were lost to fraudsters and only 100.4 million was recovered. Note: A lot of unreported cost is invested in sunning recovery processes for the lost money to cyber crime and at the end of it all, less money is recovered compared to what is lost.
- Centenary Bank is medium risk based on the heat map. It has average CI and average NII – as a retail and commercial bank, Centenary must grow more NII to at least 45%, to cover retail risks. The question now is what is the composition of the NII? Is it due to inefficiency as result of high bank charges or transaction advisory, convenience and wealth management, etc? Centenary must reduce costs of operation further like peers to win. BOI only Ugx 6 million impairment provision. Thanks to relationship banking within the Indian business community Stanchart (Low cost to Income) = Full digital bank = Low NII to total revenue. However high impairment charge from prior year loans. Winning Banks = offering convenience. Leveraging on corporate clients. Anticipate banks will close branches and focus on agency banking and digital. Brac – leveraging on agency banking –solving the current problems – security and liquidity.
- What kind of reports do you receive on cyber attacks? When did you last do a penetration test? Black box? White box? IT governance assessment?