Clock ticking fast for Saccos operating outside required ethos as Uhuru directive takes effect

The clock is ticking on unscrupulous managers and directors of financial co-operative societies following a recent presidential directive by President Uhuru Kenyatta for formation of an anti-fraud unit within the Sacco Societies Regulatory Authority (SASRA).

“I direct the Ministry of Industry, Trade, and Co-operatives to immediately operationalize the proposed Sacco Societies Fraud Investigation Unit (SSFIU) within the Sacco Societies Regulatory Authority (SASRA),” said President Uhuru Kenyatta.

He made these remarks during the 97th International Co-operatives Day that was celebrated at the KICC grounds in Nairobi. This event was also attended by Trade and Industry Cabinet Secretary Peter Munya, Principal Secretary Ali Noor Ismail as well as the co-operatives movement fraternity.

“This is what should have happened a long time ago. We have members who have lost their hard earned savings due to poor governance within these financial co-operatives. The setting up of this unit will bring sanity and improve on corporate governance within Savings and Credit Co-operatives,” said Agnes Munyi-Operations Manager at Bandari Sacco Society Limited.

She added that it will be foolhardy to ignore the poor governance structures that are currently in place within many Saccos, given the huge contribution these societies make to the country’s Gross Domestic Product (GDP).

“It is good step to the right Director into ensuring public resources. This will along way into boosting public confidence and improving the public image of the Sacco Sub Sector. Let us support the initiative, because it will eventually also weed out rogue and cyber-crime related issues by perpetrators both within and without these Saccos,” said Wilfred Aima, Board Chairman of Shoppers Sacco Society Limited.

These sentiments are shared by a cross section of senior executives and top directors in the Saccos Sub-Sector.

“This is in order. Saccos are “public” institutions which hold huge amounts of money. The establishment of this unit with SASRA means increased oversight thus raising the credibility of Saccos out there,” said Kariuki Waithaka, CEO Sheria Sacco Society Limited.

A move by the State to establish stringent measures to deal with fraud and theft within the Sacco sub-sector is coming at a time when the co-operatives industry is suffering from bad publicity, owing to loss of cash belonging to members of some financial societies that have been operating like Ponzi schemes.

A growing number of these Savings and Credit Co-operative Societies (Saccos) have also fallen prey to a web of cyber criminals. These electronic fraudsters are either lone rangers or colluding with unscrupulous managers and directors of these financial societies, to cart away millions in cash.

Interestingly, while several directors of some of these societies have been implicated in theft of cash, the courts are yet to hand in any convictions.

The latest incident involves a reputable IT Vendor which was recently attacked by a web of hackers, who swept all the cash that has on the tills of several Saccos.

Cyber criminals are said to routinely use fake mobile phone numbers and IDs to access paybill platforms of financial and then take these outfits to the cleaners.

“We are continuously evaluating our IT systems to protect ourselves from electronic attacks, including those emanating from insiders as well as those links connecting us to the IT vendors,” said Moses Chebor, CEO Boresha Sacco Society Limited. “Saccos should engage in daily reconciliations so as to quickly deal with any attacks on their IT systems. Cyber-crime, which is a worldwide problem, is not unique to financial institutions in Kenya. It is happening everywhere with many firms suffering in silence,” advices Chebor.

The list of Saccos that have been hit by cyber criminals includes Kenya Police Sacco, Stima Sacco, Bandari Sacco and Safaricom Sacco Society Limited. Other Saccos prefer to keep info on cyber-attack incidences or fraudulent activities on their IT systems under wraps and away from public scrutiny.

An increasing number of financial co-operatives are now deploying huge sums of cash to secure their IT systems and safeguard the vaults against attack by fraudsters and electronic thieves.

Financially crippled Saccos, on the other hand, remain vulnerable and are sitting ducks as cyber criminals in collusion with unscrupulous employers and directors, cart away millions through their IT systems.

These criminals are taking advantage of weak internal controls as well as a gullible board of directors and senior management, to take these financial institutions to the cleaners.

In a delayed reaction to this unfolding scenario, some of these financial co-operatives have resorted to closing the door after the horse has bolted by upgrading their IT platforms and systems only after being hit.