FRAUD

Fraud

Fraud

Nature of Fraud

The Fraud at the Central Bank of Tanzania was the major incident that took place durng the year 2006. The annual accounts of the Bank of Tanzania (BOT), the Central Bank for the year 2005/2006 were under audit by Delloite and Touche´ - a multinational audit firm of high repute. In the course of this audit some suspicious transactions in the External Payment Arrears (EPA) Account came to the attention of the auditors and they brought these immediately to the attention of BOT's Executive Office. A number of these payments related to Kagoda Agriculture Limited - a company very selected few knew about. Following failure of the Governor (who was also the Chairman of the Board) to respond to concerns of Auditors the Lead Audit and Engagement Director found it necessary to formally bring the concerns to the attention of the entire Board of Directors, through the Chairman (with copies of the Auditor's letter sent to all board members). This letter to the Governor detailed a number of serious shortcomings in internal controls and approval mechanism of the payments to Kagoda Agriculture Limited. It pointed to existence of an elaborate fraudulent scheme perpetrated with active involvement of officials at the Central Bank (Bank of Tanzania, n.d.a).

The Lead Audit and Engagement Director advised the Governor to immediately suspend all staff in the initiation and approval processes of the suspected fraud and immediately institute an investigation. The Auditors were not convinced that the Board was addressing concerns they had communicated and the only feasible recourse the Lead Audit and Engagement Director had was to the Minister for Finance. Upon formal inquiry with the Minister for Finance and in what was later to have been acknowledged as a serious error of judgement the Minister for Finance actually wrote a letter of representation to the Auditors re-affirming the genuineness of the payments to Kagoda Agriculture Limited. Subsequently, it turned out that the Minister had solely relied on advice from the Governor of the Central Bank and the letter was appropriately recanted when the Minister was properly appraised. But the damage done was irreparable as when this information became public the common belief was that key players in high government offices were actively involved or had knowledge of the fraud. In the end, and perhaps as a consequence of these developments the audit by Delloite and Touche was terminated by the Central Bank and therefore there was no formal audit report submitted.

For a while this was the end of the matter - until 17 September 2007. On that day at a public rally at Mwembe Yanga in Dar es Salaam a maverick Member of Parliament for an opposition party known as Chama cha Demokrasia na Maendeleo Dr Willbroad Slaa announced a ''list of shame'' in which he mentioned individuals that allegedly had perpetrated massive fraud at the BOTand misappropriated EPA Account funds administered by the Central Bank on behalf of the government. He claimed to have obtained documentary evidence of some of ...