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The ongoing investigation from Bank of Uganda into allegations of fraud in MTN’s mobile money platform promises to have a large impact upon mobile financial services. In our work around the world, we have continuously heard that fraud is an increasing concern from all stakeholders.

The investigation stemmed from an exposé from The Independent, a weekly Ugandan magazine. The exposé alleges that staff at MTN created Shs23 billion in ‘fake money’ through manipulation of MTN’s mobile money platform. According to The Independent, the fraud took place when MTN staff started manually transferring e-money to mobile money accounts, “MTN staff started creating fake subscribers and giving them fake money.” According to a former MTN worker, “these subscribers were getting free money from the system by somebody sending money to them. They were not buying from an agent.” Due to the alleged manipulation of e-money, MTN’s e-money amount was not reconciling with the amount in their escrow account at Stanbic Bank, as per normal process. Instead, the money was being created on the mobile money platform and cashed out from agents –creating mobile money value so that it could be withdrawn as real cash.

While all details are simply allegations at this point, and we await the final decision from the Bank of Uganda, the alleged actions has sent shockwaves around the mobile money globe. Regulators will worry about the lack of oversight present in Uganda and begin thinking around regulations that may improve control – such as mandating real-time settlement between mobile money values and the provider’s escrow accounts or sophisticated fraud management systems. Banks will worry that any such regulation will link mobile money accounts closer to their core banking system, putting excessive stress on it with a very large volume of low-value transactions. Mobile Network Operators will be concerned at the alleged ease with which employees were able to defraud such large sums of money (and according to witnesses, this is not MTN’s first experience with fraud). It will be fascinating to see how Bank of Uganda responds.

Read The Independent exposé here: http://www.independent.co.ug/cover-story/10056-inside-mtn-mobile-money-saga

Read MobileMoneyAfrica’s article here: http://mobilemoneyafrica.com/content.php?id=2114&utm_source=MobileMoneyAfrica+Newsletter&utm_campaign=1f9e00e82a-Newsletter_212_17_2012&utm_medium=email&utm_term=0_bc1416213d-1f9e00e82a-52313053

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