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Parastatals fleeced of $77m
According to the central bank, the introduction of the new payment sytem has also led to efficiency in the collection of taxes, as all payments of a value of $4,000 and above are now remitted through TISS.
By JOSEPH MWAMUNYANGE
THE EAST AFRICAN
Posted Monday, September 14 2009
Tanzanias large state-owned entities have been fleeced of up to Tsh100 billion ($77 million) in what could be the second biggest corporate fraud in the countrys history after the 2005/2006 central bank External Payment Arrears Account (EPA) scandal in which the government lost $131 million in dubious payments to 22 local firms.
The EastAfrican has learnt that an international syndicate with local accomplices has siphoned off between Tsh5 billion ($5 million) and Tsh100 billion ($100 million) through a fake payment system set up to swindle the Tanzania Revenue Authority.
The fraud, The EastAfrican has been told, is still under wraps as directors of firms that lost millions of shillings and senior officers from TRA shuttle between their offices and the Ministry of Finance and Economic Affairs to explain the circumstances that led to the theft.
The syndicate, according to a highly placed source in intelligence circles, is suspected to have recruited senior and middle level staff at TRA, various banks, the Tanzania Telecommunication Company Ltd (TTCL) and the Tanzania Electric Supply Company Ltd (Tanesco), and siphoned off the money between March and August.
Detectives are trying to establish the identity of the syndicate that has struck Tanzanias financial system yet again. Our source in intelligence said that a sophisticated replica of the newly introduced electronic money transfer system the Tanzania Interbank Settlement System (TISS) was used by the fraudsters to siphon off money supposed to have been credited to TRA accounts from the parastatal bank accounts.
Our TRA source said the fraudsters were able to log onto the system using a special code and verified that millions of shillings had been paid through TRA.com. In this way, money that was supposed to be transferred from TTCL to TRA using the TISS system introduced in March this year to facilitate payments in excess of $8,000 (Tsh10 million) never got to the TRA.
Alarm bells were sounded when TRA approached TTCL and Tanesco to pay arrears only to be told that the money had already been paid through TRA.com.
Minister for Finance and Economic Affairs Mustafa Mkulo told The EastAfrican that the fraudsters are suspected to have swindled some $5 million though our source within the TRA insisted the amount was $77 million and confirmed that there is an investigation going on. Mr Mkulo said that he had already discussed the issue with TRA Commissioner General Harry Kitilya.
I wouldnt want to comment on a case that has already been handed over for investigations, but as the minister in charge and under whose portfolio TRA falls, I will have to wait for the investigation report, he said.
According to the Bank of Tanzania, TISS is advantageous in that it offers same-day settlement as opposed to the cheque system which can take up to seven days for cheques to be cleared.
In addition, TISS is supposed to be more secure due to the fact that authentication is done prior to a payment being issued while cheques are authenticated after the payments have been effected.
According to the central bank, the introduction of TISS has also led to efficiency in the collection of taxes by the TRA, as all tax payments of a value of Tsh5 million ($4,000) and above are now remitted through TISS. The arrangement, says the bank, aims at minimising fraud inherent in the cheque system as well as reducing float.
However, the investigations into the alleged fraud at the TRA show that the new system is susceptible to fraud or manipulation.
The Tanzania Interbank Settlement System (TISS) is an electronic system that interlinks all the banks in the country and offer real-time settlement for high value and time-sensitive transactions.
The system is expected to go regional across East Africa once all the original partner states of the EAC have fulfilled the requirements.
The central banks of Kenya, Tanzania and Uganda have achieved among other things implementation of the Real Time Gross Settlement System.
Reliable sources in the Tanzania government told The EastAfrican in Dar es Salaam last week that the alleged fraudsters came up with an innovation that can beat any code of the bank, enabling them to siphon out money almost at will.
The money was transferred to TRA through TRA.com instead of the TRA system and all incriminating evidence erased.
An official with a clearing and forwarding company said that TRA staff were telling firms to transfer the money to TRA through TRA.com whenever they wanted to make payments above $8,000 (Tsh10 million).
Even though the new electronic money transfer system provides safeguards, authorities will have to rethink its application or improve the way it is applied before more millions are lost to fraudsters, said a TRA source.
The amount of money in question $77 million is almost half the amounts involved in the External Payment Arrear Account scandal.
So far the government has managed to recover more than $56 million (Tsh60 billion) from firms involved in the EPA scandal with some suspects in court.
According to the central bank, the introduction of the new payment sytem has also led to efficiency in the collection of taxes, as all payments of a value of $4,000 and above are now remitted through TISS.
By JOSEPH MWAMUNYANGE
THE EAST AFRICAN
Posted Monday, September 14 2009
Tanzanias large state-owned entities have been fleeced of up to Tsh100 billion ($77 million) in what could be the second biggest corporate fraud in the countrys history after the 2005/2006 central bank External Payment Arrears Account (EPA) scandal in which the government lost $131 million in dubious payments to 22 local firms.
The EastAfrican has learnt that an international syndicate with local accomplices has siphoned off between Tsh5 billion ($5 million) and Tsh100 billion ($100 million) through a fake payment system set up to swindle the Tanzania Revenue Authority.
The fraud, The EastAfrican has been told, is still under wraps as directors of firms that lost millions of shillings and senior officers from TRA shuttle between their offices and the Ministry of Finance and Economic Affairs to explain the circumstances that led to the theft.
The syndicate, according to a highly placed source in intelligence circles, is suspected to have recruited senior and middle level staff at TRA, various banks, the Tanzania Telecommunication Company Ltd (TTCL) and the Tanzania Electric Supply Company Ltd (Tanesco), and siphoned off the money between March and August.
Detectives are trying to establish the identity of the syndicate that has struck Tanzanias financial system yet again. Our source in intelligence said that a sophisticated replica of the newly introduced electronic money transfer system the Tanzania Interbank Settlement System (TISS) was used by the fraudsters to siphon off money supposed to have been credited to TRA accounts from the parastatal bank accounts.
Our TRA source said the fraudsters were able to log onto the system using a special code and verified that millions of shillings had been paid through TRA.com. In this way, money that was supposed to be transferred from TTCL to TRA using the TISS system introduced in March this year to facilitate payments in excess of $8,000 (Tsh10 million) never got to the TRA.
Alarm bells were sounded when TRA approached TTCL and Tanesco to pay arrears only to be told that the money had already been paid through TRA.com.
Minister for Finance and Economic Affairs Mustafa Mkulo told The EastAfrican that the fraudsters are suspected to have swindled some $5 million though our source within the TRA insisted the amount was $77 million and confirmed that there is an investigation going on. Mr Mkulo said that he had already discussed the issue with TRA Commissioner General Harry Kitilya.
I wouldnt want to comment on a case that has already been handed over for investigations, but as the minister in charge and under whose portfolio TRA falls, I will have to wait for the investigation report, he said.
According to the Bank of Tanzania, TISS is advantageous in that it offers same-day settlement as opposed to the cheque system which can take up to seven days for cheques to be cleared.
In addition, TISS is supposed to be more secure due to the fact that authentication is done prior to a payment being issued while cheques are authenticated after the payments have been effected.
According to the central bank, the introduction of TISS has also led to efficiency in the collection of taxes by the TRA, as all tax payments of a value of Tsh5 million ($4,000) and above are now remitted through TISS. The arrangement, says the bank, aims at minimising fraud inherent in the cheque system as well as reducing float.
However, the investigations into the alleged fraud at the TRA show that the new system is susceptible to fraud or manipulation.
The Tanzania Interbank Settlement System (TISS) is an electronic system that interlinks all the banks in the country and offer real-time settlement for high value and time-sensitive transactions.
The system is expected to go regional across East Africa once all the original partner states of the EAC have fulfilled the requirements.
The central banks of Kenya, Tanzania and Uganda have achieved among other things implementation of the Real Time Gross Settlement System.
Reliable sources in the Tanzania government told The EastAfrican in Dar es Salaam last week that the alleged fraudsters came up with an innovation that can beat any code of the bank, enabling them to siphon out money almost at will.
The money was transferred to TRA through TRA.com instead of the TRA system and all incriminating evidence erased.
An official with a clearing and forwarding company said that TRA staff were telling firms to transfer the money to TRA through TRA.com whenever they wanted to make payments above $8,000 (Tsh10 million).
Even though the new electronic money transfer system provides safeguards, authorities will have to rethink its application or improve the way it is applied before more millions are lost to fraudsters, said a TRA source.
The amount of money in question $77 million is almost half the amounts involved in the External Payment Arrear Account scandal.
So far the government has managed to recover more than $56 million (Tsh60 billion) from firms involved in the EPA scandal with some suspects in court.
