Africa as a hub of financial fraud

Euro cash notes hanging from a clothesline

By Antony Mutunga

Around the world, governments are concerned about the increasing threat that financial crime has on economic growth. Many companies and people are affected by the trillion-dollar industry which is as old as the concept of money. Sadly, the perception that most people have is that financial crime has no real victim or cost. This couldn’t be further from the truth. 

Financial crime, which lacks a universally accepted definition, can be described as any act or attempted act whereby an external or internal agent illegally manipulates, defrauds, appropriates or circumvents legislation against an individual, institution or government. It is also understood as a white-collar crime whereby criminals facilitate their unlawful activities by exploiting the financial system. Examples include money laundering, terrorist financing, fraud, cyber-crime, tax evasion, insider trading and market abuse. It has a negative impact on economic and social systems, as it can affect private individuals, companies, organisations and even entire countries.

Financial crime has been on the increase for quite some time now, but has only become more defined during the digital era, which has accorded a whole new personality. As a result of rapid advancement in technology, especially in the financial field, the growth of financial crime has rocketed. For example, the introduction of the credit card in the 1950s and the advent of the Internet in the 80s lent financial crim a sophistication it didn’t have. 

Despite fast becoming a global dilemma, financial crime is rising much faster in developing countries, particularly those in Africa. According to a 2018 report by Refinitiv, globally, out of over 2,000 respondents they surveyed, 47 percent had been victims of at least one form of financial crime. The percentage in the sub-Saharan Africa was higher, at 53 percent. 

This can be accredited to the fact that despite the continent having a large number of resource-rich countries, it still has a majority of its population living in poverty. Because the majority of African populations are illiterate, they are easy to manipulate and swindle. The lack of statistics and therefore knowledge means policies and regulations have been slow in coming, which makes Africa a haven for these criminals.

As a result, a majority of these crimes go unreported and, in some cases, unnoticed. For instance, according to Temenos Group, a South African software company, even though 92 percent of African firms consider money laundering a high risk, only 34 percent have trained staff on financial crime awareness, and only 31 percent conduct fraud risk assessment. With the majority of financial crimes thus hidden, the continent is a safe haven for droves of criminals. 

Additionally, the lack of a standardised definition has also seen cooperation between different countries become an obstacle, making it difficult for individual countries to deal with rising financial crimes. If there existed collaborations, countries would have been able to share financial crime intelligence and be better placed to protect themselves from these crimes.

Organisations are also guilty of not reporting such crimes as they are afraid of damaging their reputation, which only emboldens the criminals. Many organisations believe that once such a crime is made public, it will dim investor confidence. This in turn leaves other companies at the mercy of criminals as they fail to up defences against these crimes.

Weak leadership is another cause of the rise in financial crime. Most leaders in Africa are unwilling to curb corruption. For example, according to the African Union, about Sh14.96 trillion ($148billion) is lost yearly in Africa due to corruption. Due to non-committal leadership, institutions have become weak and workers, left to their own devices, have turned corruption into a culture. This, in turn encourages bribery, fraud, cyber-crime and money laundering. It is on this background that a 2016 PricewaterhouseCoopers (PwC) report revealed Africa as the most affected continent by money laundering costing it between 2 and 5 percent of global GDP, or roughly $1 to $2 trillion annually.

Technology too is a contributor to this wave. With technological advancements every day, fraud has become near impossible to detect, giving organisations an even more difficult job to do. Criminals have become increasingly tech-savvy and now operate with savvy complexity. Even with anti-money laundering systems in place, criminals have learnt how to hide under the radar of their transaction monitoring systems. These criminals primarily target new organisations – which are less secure in terms of technology. 

African governments and organizations must come together to share intelligence on financial crime, to effectively counter it. It is time we acknowledged financial crime as a real problem and pool efforts to combat it. (



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