- The survey said 66 per cent of 91 Kenyan companies -- including 28 that are listed on the Nairobi Securities Exchange (NSE) -- have reported fraud up from 57 per cent last year -- exposing shareholders to the loss of hundreds of millions of shillings.
- About 70 per cent of the Kenyan respondents said fraud set them back Sh10 million, 25 per cent lost between Sh10 million and Sh500 million while three per cent of the respondents say they lost more than half a billion shillings.
Safaricom has sacked about 70 employees in the past one year over fraud, in what highlights the rising cases of economic crime in corporate Kenya.
The mobile telephone company said it had detected 114 cases of economic crime, including accounting fraud, asset misappropriation and bribery in the past year, which led to the sackings and prosecution of 16 workers.
The fraudulent dealings are contained in Safaricom’s just released sustainability report, which highlights the firm’s economic, environmental, social and governance performance as opposed to the annual report that is heavy with financial reports.
Safaricom becomes one of the few companies in corporate Kenya to unveil its fraud statistics in a market where firms, according PricewaterhouseCoopers (PwC), prefer to remain silent over economic crimes fearing a public relations backlash and brand damage.
Bob Collymore, the CEO of Safaricom, reckons that the report is about transparency and the quest to boost the firm’s internal processes and engagement with its stakeholders like suppliers and business partners.
“The report signifies that we are tough on internal corruption and fraud,” said Mr Collymore in an interview with the Business Daily.
“A number of actions have recently been implemented to fight fraud, including setting up three distinct sections to handle fraud and the use of automated fraud detection tools.”
He added that a significant number of the fraudulent cases involved collusion and bribery between its workers and agents.
This was highlighted by a recent court battle where Safaricom lost nearly Sh100 million in a fraudulent banking scheme it accuses its agents of hatching and executing.
It sued 13 former agents for obtaining goods worth Sh93 million using banking slips that were later found to have been forged.
The dealers were to deposit cash, bankers’ cheques or make a bank transfer and present deposit slips to the telecoms firm before receiving goods.
A forensic audit conducted by consulting firm Deloitte revealed that the distributors used fake deposit slips to fraudulently obtain goods worth Sh93 million.
The audit established that several deposit slips the distributors had presented could not be traced in Safaricom’s account, causing the telecoms firm to terminate the services of the affected dealers.
There are also cases of businessmen bribing Safaricom employees to be awarded agency contracts, especially for the money transfer service M-Pesa.
“We recently dismissed 16 employees for accepting bribes to offer M-Pesa agencies and last year we terminated 28 dealers because of fraud,” said Mr Collymore.
Safaricom says it has sacked 60 employees over the past year due to fraud and pushed for the resignation of 18.
It has referred 11 cases for court action and five to the Ethics and Anti-Corruption Commission (EACC) or 14 per cent of the reported cases.
This is in line with a PwC report that notes most employers in Kenya prefer firing fraudulent employees rather than file civil or criminal charges against them despite the sharp increase in incidents of fraud with economic downturn in the past couple of years.
“Most employers are avoiding the extra costs and strenuous procedures that come with the legal process,” Martin Whitehead, head of forensics and investigations at PwC told the Business Daily in an earlier interview.
“It partly has to do with image, especially in sensitive sectors such as banking and logistics. Many companies believe that such legal processes may give room for shenanigans that only work to destroy their brand.”
The reluctance by most companies to sue or dismiss employees who have committed fraud for fear of reputation loss is also behind the rise in theft at the work place, says PwC, adding that the extent of fraud can be appreciated more when the non-financial implications are considered, including loss of customers, business reputation, and low employee morale.
The consultancy firm said in its global survey that Kenya recorded the highest level of economic crime among 78 countries last year with procurement fraud and the theft of assets and money at work rising.
The survey said 66 per cent of 91 Kenyan companies -- including 28 that are listed on the Nairobi Securities Exchange (NSE) -- have reported fraud up from 57 per cent last year -- exposing shareholders to the loss of hundreds of millions of shillings.
About 70 per cent of the Kenyan respondents said fraud set them back Sh10 million, 25 per cent lost between Sh10 million and Sh500 million while three per cent of the respondents say they lost more than half a billion shillings.
Kenya ranked second-highest after South Africa in 2009 when the last survey on economic crimes was conducted by the firm.