Telecoms giant MTN and Stanbic Bank are in hot water in Uganda as that country’s government has threatened to halt the two companies mobile money transfer system, amid revelations of alleged fraud.

The Bank of Uganda’s director for non-banking institutions, Benedict Ssekabira, has warned that his organisation could implement stringent action against MTN and Stanbic Bank - a member of South Africa’s Standard Bank Group - for running a mobile money system in that country without following correct procedures.

Ssekabira blames both partners for having weak controls and alleged fraud.

According to Uganda’s The Observer, MTN late last month fired one of its senior managers in charge of mobile money - Richard Mwami - following a 9 billion shillings loss, which was allegedly pilfered through fraudulent means.

Ssekabira said that the central bank is mandated to control the activities of all institutions dealing with money and protecting the public.

He added that both MTN and Stanbic should put in place mechanisms to ensure that losses and any scams are eliminated, or risk intervention from the central bank.

“We don’t want to see anything that puts clients money at risk,” he said.

“Control(s) are a must and they must be effective to deliver expected results, that (is) how we expect these two institutions to operate,” he added.

Ssekabira disclosed that the central bank had on a number of occasions met staff of both entities to deliberate on the alleged issues that were threatening the stability of the mobile money services.

He said that he had met with Stanbic Bank Uganda and agreed with them to strengthen data capture mechanisms, establish strong backup systems, enhance risk management and liquidity management, among many other requirements in relation to laws that govern virtual accounts and the business of mobile money transfer.

“Growth in the number of customers of clientele should be supported with improvement in the effectiveness of the platform to accommodate the growing numbers," Ssekabira stressed.

Ssekabira indicated that the central bank has the mandate to close down the service and terminate it for good if it is deemed unsustainable.

MTN late last month had released a statement regarding the allegations of fraud, saying, “With further upgrades and modifications undertaken to increase its robustness, MTN is confident that it has brought the Mobile Money system to high levels of stability and security.

“MTN Uganda continues to introduce new features to enhance the functionality of the Mobile Money service to provide a safe environment for customers to perform financial transactions, and to enhance their experience of MTN Mobile Money.

“Customers can rest assured that their transactions and money are safe on MTN Mobile Money system,” the company said.