How we almost fell victim to attempted fraud - TAC

Monies recovered after Standard Bank alerted NGO to suspicious transfer

The Need for Transparency and Openness about Corruption - Wherever it Occurs: How TAC has handled a case of attempted internal fraud

23 August 2011

In December 2010 a TAC employee attempted to defraud TAC of R300,000. We have decided to tell the details of this story for these reasons:

1. TAC has always upheld high standards of accountabiity. We seek to be a model of a responsible civil society organisation. In 2003, we also issued a public statement about a staff member, Onos Imhanwa, who defrauded the organisation. That statement is here:

2. By highlighting this case and naming the perpetrator we want to discourage future efforts to commit fraud.

3. It is important that there is a factually correct record of what happened rather than inaccurate rumours. We believe organisations are almost always better served by being transparent, open and forthcoming when they are the victims of incidents such as this.

Background & Facts

In late 2010, TAC received our disbursement for our Global Fund grant. Urgent payments had to be made to one of our partner organisations totalling over R1 million. We had a limit of R500,000 for how much we can pay in a single day in total to all recipients. Therefore several payments were scheduled over a period of time taking into account other payment commitments. In order for a payment to be processed, at least two authorised people have to sign off on it electronically.

However, there was a loophole in our system that the TAC management was unaware of. A new account could be opened reflecting the correct beneficiary name but using an incorrect bank account number. This could be done by the payments clerk without a second authorisation. An employee in our finance office with access to the electronic accounts, Nwabisa Njaba, created a new beneficiary account reflecting the correct partner organisation's name but used her friend's bank account number. Ms Njaba was the employee responsible for issuing payments.

Consequently when the payment to our partner organisation was processed on 3 December 2010, instead of the money going into the partner organisation's bank account, the money went into Ms Njaba's friend's account. The amount transferred was R300,000. While authorisers of the transaction noticed that the name of the recipient organisation was correct, they quite understandably did not notice that the bank account number was not correct. (TAC's finance department processes numerous payments every week.)

The following week Ms Njaba successfully withdrew R50,000 from the Standard Bank account that she had transferred the money to. She tried to do this again the next Saturday, but the bank noticed that something was suspicious. The second withdrawal was refused. The bank contacted TAC's Chief Financial Officer. He immediately reported a case of fraud to the South Africa Police Service.

Standard Bank's internal video surveillance footage showed that it was Ms Njaba who was trying to withdraw from the account. Our internal investigation uncovered the method behind her fraud. Ms Njaba was immediately suspended and had to appear before a TAC disciplinary committee, which dismissed her. She was also charged with fraud and her case has gone to court. She has pleaded guilty and sentence is to be passed in September 2011.

Standard Bank transferred the remaining R250,000 back into TAC's Global Fund account. TAC also recovered the R50,000 Ms Njaba had stolen from her employee provident fund. Therefore the entire amount has been recovered into the Global Fund Account.

TAC's management team has instituted measures to reduce the risk of this kind of fraud taking place again. For example, now multiple authorisers have to approve the capturing of new beneficiaries into the banking system.

The risk of fraud exists in almost every medium and large organisation. The challenge for organisations is to ensure they take the appropriate measures when it does happen, including reducing the risk of it happening again.

Statement issued by Nathan Geffen, TAC Treasurer, August 24 2011

Click here to sign up to receive our free daily headline email newsletter