In the first blog of this series we outlined the evolution and increasing sophistication of fraud in Uganda. The ingenuity of fraudsters is impressive. But what about the MNOs’ response?
Have the providers set up systems improvements and processes geared toward checking such frauds?
Talking to the staff of leading mobile money providers in Uganda, they concur that eliminating fraud poses a serious challenge for them and note that they continue to build internal systems that audit and check fraud. Some have now incorporated the appearance the recipient’s name on the phone’s display to confirm the right recipient before completing transactions. This both reduces the number of remittances to the incorrect number and narrows the scope for fraud using spoof SMS and requests to reverse “erroneous” transactions – see Survival of the Fittest: The Evolution of Frauds in Uganda’s Mobile Money Market (Part-I).
The MNOs say they have increased the capacity of their customer help lines for mobile money with dedicated teams that quickly respond to fraud and other complaints. They have also set up separate helplines and call centre representatives to service and support agents. They also continue to improve internal processes to frustrate fraudsters, including blocking of disputed mobile money accounts and quick resolution of reported fraud cases.
In addition to these system and process improvements, MNOs talked to say they continue to spend significant sums of money on above the line (ATL) awareness campaigns to educate customers and agents on how to safeguard themselves from fraudsters.
MNOs note that they also use their agent hierarchy channels of float distribution. This is through the use of their master agents commonly referred to as “float aggregators”. MNOs have trained these master agents on fraud detection, reporting and resolution processes. The master agents (who interface with agents on a daily) pass on this knowledge to their agents during their site visits for rebalancing and support.
MNOs have also used regional mass agent meetings across the Uganda. See “How MTN Uganda Communicates To Its Network Of 15,000 Agents” for a description of MTN’s approach to this. At these regional meetings, agents air their grievances and highlight areas that require attention from the provider. Typical pain points include rebalancing issues, customer care response and efficiency on issue resolution, and marketing/branding. However, fraud is one topic that always appears in these agent meetings and MNOs come well prepared with key learnings and tips to avail agents on how to safeguard themselves from fraudsters. The challenge with these agent meetings is that they are not regular with some MNOs taking more than a year to organise them … and when they do, it’s a one day event (of approximately 8 hours).Towards the end there is a rush to complete the day’s agenda. And who knows … the fraudsters could also be in attendance disguised as agents!
Three of the MNOs add that in 2012, the GSMA Association held workshops in Kampala to bring MNOs dealing in mobile money together for the first time. At this workshop, the participating MNOs agreed to work together on pertinent issues that concern the industry - with fraud strongly at the forefront. The MNOs have since then had a number of consultative meetings with the regulator (Bank of Uganda) to come up with collective policies to protect the industry from fraud. They are however quick to add that the regulator is also on a learning curve on mobile money operations, so decisions go back and forth before being agreed upon. These lags provide leeway for fraudsters to become even more innovative and sophisticated in at their game.
So why does fraud continue to manifest and evolve within mobile money in Uganda’s market?
If we analyse the evolution of fraud in Uganda, it is evident that fraudsters have always been ahead of measures to curb their activities, with MNOs typically having to react to fraud. This is however not surprising, given that mobile money is a new in Uganda (it is close to six years since the first deployment) – the providers (and their agents) are on a steep learning curve.
However, there are some mechanisms that MNOs might usefully consider:
1. Frequent on site visits to agents. From the 2013 Agent Network Accelerator survey for Uganda conducted by The Helix Institute of Digital Finance, of the over 2,000 agents interviewed, only 33% reported being visited, trained and monitored by MNOs. And 46% of agents were not visited at all and are thus left to learning from their peers, or by bitter experience, about the tactics commonly used by fraudsters. If this lacuna continues, is good news for fraudsters. MNOs should consider increasing their site visits to agents with a view of training them on fraud management thus increasing agent’s awareness of the evolution and increasing sophistication of fraud. Since agents interface with customers, given knowledge on fraud prevention, and the time involved to resolve fraud related challenges, they will pass this on to customers.
2. Risk/Fraud teams within mobile money functions. MNOs in Uganda have employed staff with a banking background and fraud management experience into their mobile money departments. However, these staff are mostly concerned with checking and controlling internal system fraud. MNOs need to move beyond this and have dedicated staff who are on the lookout for trade/field fraud targeting their agents and customers. Such staff would be charged with fraud prevention KPIs, and not just with KPIs for responding to fraud cases. Such staff could be trained to think like fraudsters so that they predict the next possible tricks and tactics of fraudsters. Basis these predictions, MNOs can run agent training and agent/customer awareness drives to prepare for the next generation of fraud in the market.
3. The use of agent themselves. In 2012, Ugandan agents formed a national association that is meant to represent agents’ interests and concerns. The association currently claims to have 30,000 members. Its activities have not been wholly welcomed or accepted by all MNOs, primarily as it has been lobbying against exclusivity clauses in agents’ agreements. However, this national agents’ association could play a very important role in fraud mitigation. MNOs can leverage on this by equipping the agents’ association with fraud prevention knowledge which they also pass on to the rest of the agents countrywide through agent to agent visits or organising agents’ meetings.
4. Collaboration. MNOs will eventually need to continue and deepen collaboration and information sharing on the emerging frauds in the country (and ultimately elsewhere too) to better address these. With the growing prevalence of non-exclusive agents, it is reasonable to hope that collaboration not just on information but also on agent training and monitoring will follow.
The role of the Bank of Uganda (BoU).
The role of the regulator is paramount in prevention and mitigating of risks in the DFS industry. In a bid to protect clients, BOU in October 2013 introduced mobile money guidelines which spelt out the role of each player in the ecosystem in preventing and mitigation of fraud.
The guidelines require providers to meet specific criteria, including providing a risk management proposal and putting in place appropriate and tested technology systems to detect anti money laundering (AML) and terrorism financing. The guidelines require the providers to comply with requirements on consumer protection, and also stipulate that providers train their agents (including training on fraud management).
The guidelines require agents to provide some KYC credentials (at the time of recruitment) that include proof of registered business with physical address and to have an account with a licensed bank. The agent should also register and collect appropriate KYC documents from customers and deliver these to the provider. Agents are required to sensitise customers on PIN code safety, attend to their queries and of course service their transaction needs.
The guidelines forbid the agents to carry out customer transactions when the mobile money platform is down and it does not allow them to carry out transactions on behalf of customers through over the counter (OTC).
The guidelines advise the customer to exercise due care during transactions and note that it is their responsibility to keep PIN codes safe.
Is this enough from the regulator?
BoU says it works with other regulatory bodies with regards to mobile money, because the industry cannot be looked at in isolation. Other regulators such as the Uganda Communication Commission have a role to play since they regulate the MNOs who are the major players in DFS. The BoU specifically regulates licensed institutions, especially the banks that work closely with the MNOs. The BoU focuses on the effectiveness of the board of licensed institutions that provide mobile money. They also look at the policies, internal controls and IT systems of the organisations that are in charge of these accounts. They also carry out targeted inspections periodically and act on issues brought to their notice.
The BoU perceives mobile money as any another product in the banking system and has no separate or dedicated department to monitor operations of mobile money. It falls under the Directorate of Supervision for Commercial Banking, which has a Financial Innovations Sub-committee and an Agency Banking Sub-committee. This could be interpreted as suggesting that the regulator does not have capacity to monitor and supervise mobile money activities at the agent level.
The BoU has recently issued full page pull outs in newspapers with the intention of educating and explaining consumer rights and their bare minimum expectations from agents. This was done in English with a promise of making translations into different local languages, and is an important positive step forward towards improved customer protection.
With the proliferation of mobile money services in the country, there is a strong case for BoU increasing its capacity to supervise agents as well as compliance with core banking requirements. After all there are now nearly twice as many active mobile money accounts as traditional bank accounts. The hundreds of mobile money agents and users being defrauded each week deserve this protection. Ultimately, such supervision should increase the credibility of the industry and thus it will be in the interest of the providers too.