The Little Devils lurking in a Christian Country called Zambia

Although Government of the Republic of Zambia (GRZ), Ministries, Departments, Agencies (MDAs), Parastatals, and other Institutions like the Zambian Banking Sector would like a situation where fraud and financial crime could happen to other financial institutions like the Pensions and Insurance, Mining and Retail Sectors, Agricultural and Tourism Sectors, it is an undeniable fact that all GRZ, commercial and financial sectors in Zambia are potential victims. Fraud is among the oldest human occupations.

Ever since Jacob obtained Isaac’s (his father’s) blessings by impersonating his brother Essau, the efforts and energies spent by some human beings to get something for nothing has been a recurring theme in literature.
For this Christian Nation of Zambia, those who went to Sunday and Sabbath Schools or have read the Holy Book called the Bible, are reminded that the oldest fraud is told in the Book of Genesis Chapter 27.

Under modern Zambia and using the current Statutes, Jacob and his mother Rebecca depending on so many factors including political will at the top could have been charged with conspiracy, impersonation with intent to defraud and indeed obtaining blessings by false pretences. Other professional colleagues may also argue that under the current Zambia penal and judicial system the duo would have been acquitted due to unending court gymnastics, adjournments, legal technicalities and political inclines.

Fraud is a generic term for behaviour, which involves deception by one party of another. Although the law relating to fraud differs in separate jurisdictions there are common threads, which identify behaviour as fraudulent. These will include the practising of a deception, the dishonesty of the person practising the deception, the obtaining of property and/or the intention of interfering with another person’s lawful right to deal with property as he wishes.

The number and variety of legal definitions of fraud and like criminal offences are too voluminous to repeat here and those can be discussed later.

Fraud involves deliberate criminal intent and deception. Fraud is any intentional act or omission designed to deceive others, resulting in the victim suffering a loss and/or the perpetrator achieving a gain. Some of the salient elements in Fraud are;

1. Knowing submission of false representation or concealment (knowledge)
2. Specific intent to deceive (deception)
3. Detrimental reliance (losing money or assets)
4. Potential/Damage/loss to the Bank or financial institution or organisation.
Fraud is defined as any loss or attempt to cause loss involving deception.
The nature of the deception may include, inter alia:
• verbal or written statements which are false or misleading in
 applications for personal/corporate credit or current/savings account facilities;
 Letters of Credit, Bills of Lading or other trade documents;
 Supporting documents (e.g., audited/management accounts); or
 Internal vouchers or other documentary records such as Local Purchase Orders.

A deception can also involve the deliberate input, alteration or destruction of data on any computer or communication systems and/or involve the use of forged documents. A deception can assist in perpetrating a fraud and also to conceal a fraud or simple negligence.

Some of the practical examples of Fraud experienced in Zambia have been broken down into the following categories:
• Sheer Theft of cash. Deeping fingers in the till or cash box
• Internet Fraud (on customer’s accounts)
• Customer Identity Thefts. Details from the epitaph
• Card Fraud (credit/Debit/ATM)
• Loan Application Fraud
• Card Merchant Fraud
• Funds Transfer Fraud
• Lending Fraud
• Advance Fee Fraud

This involves fraudsters persuading innocent victims to part with funds in advance of securing what appear to be attractive jobs or investment opportunities, or loans, which never materialize.
• Account Fraud
This includes false entries on accounts, fraudulent applications including loan applications and
fraudulent instructions.
• Card Fraud
This includes card skimming, counterfeiting and disputed transactions.
• Cheque Fraud
This includes counterfeits, alterations, forgeries, raising, cheque- kiting.
• Trade Fraud
This includes forged, altered or fake trade documents.
The list goes on and on. Fraud involves deliberate criminal deception and is committed by people of all shapes, sizes, heights, hues and from all walks of life. Pastors, Bishops, Clerks, Ministers and Presidents (of clubs and Associations or for the Republic) have been accused of committing financial crimes such as corruption, fraud, money laundering etc.

I wish to submit that just like in corruption cases sheer dishonesty and greed, not necessarily the amount of salary or wages one gets per month counts. When it comes to the question of money, do not trust anyone, and not even yourselves. This is the reason we can have a very honest and trustworthy Government Office orderly and or messenger but have a greedy, craft and dishonest Church Bishop and Government Minister. In Zambia, we have heard of several high ranking people involved in what my grandmother would only term as embarrassing and shameful activities.

Why would such a situation arise? In white – collar crime, the potential rewards are much greater than in blue collar crime. The risk of detection is lower, successful prosecution is more difficulty as one is able to summon the whole mighty platoon of the best Legal brains in the Country, state counsels and Senior Legal men and women to raise preliminary issues in courts of law, apply a dozen of injunctions, a couple of Legally challenging objections and adjournments for years on end whilst the loot is diminishing and being shared. The resultant effect is that the penalties are less severe.

What do you expect with “deliberately ill equipped and with no adequate logistical, technological and financial resources” and largely ALLEGED and presumed to be often corrupt Law Enforcement Agencies and Officers who would rather have a drought and poverty stricken but hungry villager who has stolen a cob of maize or a village chicken (free-range chicken) be convicted for five years in prison with hard labour than let the twit swindler of colossal sums of money go scot-free under the pretext of the case being technical?

These are all sound “business” propositions and reasons for fraudsters to put their efforts into fraudulent activities. Those engaged in such criminal activities are many. It is BIG business.
Loses through fraud in all GRZ MDAs and financial institutions have increased significantly over the years. There are many changes which have impacted adversely on the socio-economic wellbeing of the Country including;

• fluctuation and falling world price of copper which is Zambia’s main export,
• high population growth from 3million to more than 13million within 50 years,
• Unsupported population drift from rural to urban areas putting strain on public utilities
• Unplanned mushrooming of squalor and squatter compounds with very few social amnesties
• Exponentially rising unemployment levels as more GRZ and Private Universities and colleges channel out thousands of graduates on the streets with no assurance or promise of jobs insight
• Mismanagement, abuse of office, power, authority and corruption in the echelons and corridors of power starting from the 20 year MMD rule
• High poverty levels (60 to 70%) of Zambian population live below poverty datum line.
• Steep decline in traditional values/morals leading to all nature of vices;
• Unexplained failure by Government workers and authorities to make meaningful stand against crime. If there are some, the general populace see those as Empty rhetoric.
• Those failing to be transparent and accountable (according to numerous Auditor General’s annual reports) since they are alleged or suspected to be actively taking part in economic plunder themselves.
• The wrong notion of hero-worshipping and admiration of the fraudsters and the corrupt means used to acquired assets and money through dubious means.

Suffice to state that control systems and framework in various institutions are generally satisfactory, but they are not fool proof against attack from the Little Devils in this Christian nation called Zambia. The “enemy within” – members of staff and their outsider ca-hoots and collaborators. Those who predominantly perpetrate these types of crime can be profiled among many others in one of the following categories;
• Intelligent and Inquisitive but misdirected energies for wrong intentions​
• Too Friendly and charming – familiarity breeds contempt
• Hardworking, Very confident and convincingly capable of coning
• Too much exaggerations of their perceived achievement
• Knows the systems and procedures well but for bad intentions
• Articulate and may be able to speak in tongues.
• Risk takers and rule breakers
• They think they are sophisticated and appears to be wealthy but there is no way to trace their source of wealth
• They pose as big spenders, (Zambian musician Mozegator would call them “BIG BUYER” in Social Clubs). If the big buyer support Manchester United Football club, all followers would support “Man U” on that day.
• Portray an expensive life style​ and show-off with perishable assets like cell phones, ipads, galaxy, Nokia and expensive cars.
• Aggressive; in a hurry ; Greedy or has genuine financial needs
• Name dropper – smart and wearing expensive perfumes, Brazilian or Peruvian wigs, designer clothes, shoes etc.
• Disgruntled at work, a complainer – chief complainants
• Friendly and charming. Very confident and convincing
• Thrive in an office with no segregation of duties
• They rarely take vacation or off sick days. Even with a running nose/flu/fever, headache, coughing uncontrollably, they are still on Company desk.
• They work excessive Over Time – late at night or weekends
• They make excessive adjusting entries/ white-outs
• They Request excessive deadline extensions during monthly closeouts or other accounting cycles
• They will usually exhibit a drastic change in life style, throwing parties and drive expensive cars
• Will go to great extents to disguise their ill-gotten gains
• They refuse promotions, job rotations or changes
• Excessive debt, Alcohol or drug abuse; Gambling in casinos, Clubbing; Zenon, Chez Ntemba,
• Sudden change in lifestyle and spending habits
• Failed outside business ventures – kantemba/taxis
• Sense of despair over current ‘life experiences’ e.g. severe illness in family
 Change in behavior; Constantly working late alone
 Unusual occurrences of mistakes
 Returns to work even on sick leave
 Unusually close relationship with certain customers giving them special service

Third party crime has been perpetrated by various types of fraudsters, ranging from unemployed ex-officials (armies of these were created by the closure of several major local banks like Meridien, Commerce, Union, ACB etc), whose number has swelled by constructive dismissals and downsizing by the remaining Banks, GRZ, MDAs, and Government wings through Voluntary separations and resignations to professional gangs and cartels with connections outside the Country.

De-regulation of foreign exchange Controls, abolishing of SITET, Liberation of the economy, even with the Balance of Payment (Statutory Instrument – S.I. 55) in place has made it possible for criminals to remit fraudulently obtained money, which hitherto had been prevented under the exchange control regulations.
In Government Ministries, Parastatals, Departments and Agencies, including private sectors, Internal and external Auditors, Internal Investigations teams have been able to identify, apprehend and effect a “citizens’ arrest” of the culprits in most of the criminal cases.

Whilst some of the demoralised and frustrated Police Officer’s action has been lethargic, institutions have had no problem in getting them to the scenes of the crime (often by cajoling, providing transport and lunch allowances). Culprits have been surrendered to the Zambian Law enforcement Agencies, the Director of Prosecutions and his team members and subsequently to the Courts of Law.

However these three arms of Government are increasingly failing to inspire the Zambian people, failing to deliver or are painfully slow to reform and administer justice and subsequently fraudsters are left scot-free. Clearly the penal system has not moved with times and the Patriotic FRONT (PF) government which assured the general populace should not fall into the trap of paying a lip service to resolving the numerous Law Enforcement Agencies, DPP and Judicial ills Zambians have been crying over since independence.

Fraud prevention is like running a race with no finishing line. As criminals become more sophisticated in their attempts to steal money from financial institutions and Government Coffers, so must the effort to create better security features and prevention strategies increase thereby slowing fraud proliferation.

We all as Zambians need not sit on our laurels and wait for a fraud to occur within our work places and then we start calling on Law enforcement Officers or the Auditor General’s Office to investigate and establish what was happening within our sphere of influence. We can avoid the proverbial closure of the pain when the horse has already bolted.
It is a zero option, we just have to painfully realise sooner rather than later that in Zambia, punishment of fraudsters and recoveries of stolen funds are so rare that prevention is the only viable course of action. Effective preventative measures are much cheaper and far less painful than post-fraud investigations and litigations. It is better to drain the swamps than to fight the alligators. The extent of preparedness for this growing challenge to all Zambians cannot be overemphasized.

Never stand aloof, whenever you smell a fraud or whenever a fraud occur, take keener interest in reading the red flags in staff members activities, and taking appropriate remedial steps to either pre-empty or sanction any untoward actions part of staff and fraudsters, take positive action. SPEAK UP, Whistle blow, Tell the Transparency International. Call Anti-Corruption Commission, Phone the Police Station. Inform your boss. Decline to authorise. Take keen interest in reading the red flags in your staff and customer behaviour, conduct and take appropriate remedial steps to either pre-empt or sanction any untoward actions on the part of staff and fraudsters.
While it may be difficult to prevent all incidences of fraud, it is possible to reduce their impact by performing a fraud risk assessment within your branches. You should aim to understand the methods of frauds which can be perpetrated by and applicable to each job function. We have lessons learnt from other colleagues and institutions in Zambia. They are usually reported in the media both electronic and print media. Learn Lessons and avoid being defrauded.
Let us realize that fraud is a big industry and there is specialization of labour. Those who specialize in forging of signatures, skimming and cloning Visa Cards, stealing of blank cheques, in impersonating others and masquerading as bonafide customers, known agents etc. Fraudsters are busy scheming, planning and submitting project proposals on which institution, which Agency or Ministry with weaker controls they can penetrate and attack.
Fraudsters have needs and wants. Fraudsters are planning to celebrate the Christmas and the New Year – 2014 in style. They want to throw big and lavish parties. They have a long list of invited guests to attend their wedding or party celebrations. Fraudsters have ZESCO, Water bills, DSTV, Ground rent, Rates, House rentals, school going children and dependants to look after; they have increased school fees for the year 2014 and probably house construction in Chalala or Meanwood to be completed, a big car to import etc. Fraudsters have to project cash flows and devise means and ways of fund-raising. Fraudsters with misdirected energy and intelligence are smart people who know that Money is in the Road Sector, Construction, Tourism, Agricultural Sector, Revenue Collections and Authority, money is kept in Bank accounts and the Big Banks. They will carefully plan and identify the weakest link among the staff and strike. You obviously do not wish to be the weakest link.
There is no honour in committing fraud. Do not connive and collude with fraudsters, they will damp you and leave you in deep trouble because they can’t keep their word. That is their nature. Be alert! Be vigilant! Wake up and speak up! Defend your territories from the yoke of impostors, conmen and conwomen masquerading as bonafide customers and middle men.
All organizations are subject to fraud risks. Large frauds have led to the downfall of entire organizations, massive investment losses, significant legal costs, incarceration of key individuals, and erosion of confidence in capital markets. Publicized fraudulent behaviour by key executives has negatively impacted the reputations, brands, and images of many organizations around the globe.

Reactions to recent Institutional and corporate scandals have led the public and stakeholders to expect organizations to take a “no fraud tolerance” attitude. Good governance principles demand that an organization’s board of directors, or equivalent oversight body, ensure overall high ethical behaviour in the organization, regardless of its status as public, private, government, or not-for-profit, NGOs and NGIs (Non Government Individuals); its relative size; or its industry.

The board’s role is critically important because historically most major frauds are perpetrated by senior management in collusion with other employees. Vigilant handling of fraud cases within an organization sends clear signals to the public, stakeholders, and regulators about the board and management’s attitude toward fraud risks and about the organization’s fraud risk tolerance. What we heard about Zambia Railways Limited was never inspiring.

In addition to the board, personnel at all levels of the organization — including every level of management (CEO/Managing Directors and Executive Management Committee members), staff, and internal auditors, as well as the organization’s external auditors — have responsibility for dealing with fraud risk. Particularly, they are expected to explain how the organization is responding to heightened regulations, as well as public and stakeholder scrutiny; what form of fraud risk management program the organization has in place; how it identifies fraud risks; what it is doing to better prevent fraud, or at least detect it sooner; and what process is in place to investigate fraud and take corrective action.

This guide is designed to help address these tough issues.
This guide recommends ways in which boards, senior management, internal auditors, Fraud preventions/Fraud Risk Management teams, Fraud investigators can fight fraud in their organization. Specifically, it provides credible guidance from leading professional organizations that defines principles and theories for fraud risk management and describes how organizations of various sizes and types can do the same.

Given the alluded to shortcomings, Zambians need to take concrete steps to arrest the scourge of Financial crime risks in all sectors of the economy. We need to learn lessons and have a deeper understanding of the concepts and theories or typologies of money laundering, terrorism financing, corruption and various operations of fraudsters so that knowledge acquired can further enhance our capabilities to review systems and controls which are breached and recommend remedial measures resulting in tighter controls being adopted which will subsequently thwart further fraud attempts in many organisations. We need to develop comprehensive and coherent strategies to address various forms of malpractices by all stakeholders.

I strongly believe in mother Zambia and the great people of this Country. I’m very confident that if managerial accountability and transparency is embodied in the financial sector coupled with good corporate Governance, MDAs, law enforcement, the DPP and Judiciary, the corporate governance of such institutions would be easier thereby reducing criminal activities which inevitably bring about lack of investor confidence, capital flight, closures of companies and industries and consequently create untold misery on the already helpless citizenry who will have little to do apart from engaging themselves in criminal activities.

Published by Kemman

Regulatory and Independent Consulting Professional with expertise in Financial Crime Risk Compliance encompassing Anti-Money Laundering (AML), Countering Terrorism Financing (CTF), Anti-Bribery & Corruption (ABC – FCPA & UKAB), Global Trade & Sanctions, Bank Secrecy Act (BSA), Know Your Customer (KYC) and Customer Due Diligence (CDD), Internal Audit Testing, Reviews, Validation, Risk Assessment. Worked in Asia, Africa, Europe, the Middle East, North America (USA). Banking & FinTech, Anti-Sex & Human Trafficking Advocate, FOREX & Cryptocurrency trading, Travel & Tours, Telecommunications & Energy.

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