MTN SA accountant suspected of R24m fraud
An MTN SA accountant has been arrested for alleged fraud totalling R24 million.
This has been confirmed by SA's Directorate for Priority Crime Investigation, a unit of the police service.
MTN says it is working with law enforcement authorities and its banking partners to recover the stolen funds.
The 42-year-old suspect was scheduled to make an appearance at the Johannesburg Specialised Commercial Crimes Court this morning after she was arrested at the company's offices in Fairlands, Johannesburg, yesterday.
Ndivhuwo Mulamu, captain of the South African Police Service, says MTN opened a case against the employee after the company's bank alerted it to suspicious transactions between 16 July 2015 and 4 April 2017.
"We are still investing but at the moment only her personal bank account is reflecting that money was transferred into it and not into anybody else's account," says Mulamu.
"Her lawyer may argue she is not the one who made those transfers and that is why this remains an allegation. We will determine after the investigation whether she did it or not. The account belongs to her but we are not overlooking the fact that somebody else could be involved."
Mulamu says the nature of the case and transactions involved mean it must be investigated by the Hawks, a unit that investigates cases involving serious organised crime, serious commercial crime and serious corruption in terms of South African law.
"None of the transactions was for less than a million rand."
The police service has not ruled out the possibility of more arrests.
In an e-mailed response to ITWeb Africa's questions, MTN said: "MTN cannot disclose further details about this matter as this may jeopardise the ongoing investigation.
"MTN, like many corporates, contends with incidents of fraud and maladministration from unscrupulous employees, service providers and fraudsters, and it is working diligently with its business partners and law-enforcement authorities to curb such incidents."
Steven Ambrose, CEO of Strategy Worx Consulting, says the alleged fraud does not necessarily represent a complete failure of controls within MTN as an organisation or by its auditors.
"There is no question that internal controls failed and processes that must be in place to stop this type of fraud were circumvented. The context and value of this type of fraud must be taken into account as the amounts of cash flowing in an organisation the size of MTN would make R24 million a fairly immaterial amount from an audit perspective.
"The investigation will reveal there were multiple failures and possibly some level of collusion in order for these amounts to be stolen from MTN.
"As auditors are not policemen and have to work on both a system and transaction basis in a manner that employees can see and understand, it is possible these amounts were not material enough to warrant special attention and were concealed from the internal controls and external auditors. None of this makes the fraud acceptable, but in a company as big and as complex as MTN, these types of fraud will occur from time to time.
"In the final analysis, the fact that it was finally caught shows that at some point the controls and systems did work," he continues.
The fraud case concludes a challenging week for MTN Group after credit rating agency Fitch downgraded the telecommunications company to BB+, which is widely known as the first notch of junk status.
A statement from Fitch attributed the telco's downgrade to below investment grade as a consequence of the downgrade of SA to junk four days earlier.
"MTN's rating reflects the weakness of the macro-economic and operating environments of MTN's main operating subsidiaries in SA and Nigeria. The FX mismatch between net debt and cash flow could lead to higher leverage if the US dollar strengthens. MTN's rating is constrained by the South African sovereign rating."
Ambrose believes the fraud and theft case will be damaging to MTN's reputation at a time when the company can ill afford negative publicity.
"It will reflect badly on MTN at a time that there is much turmoil in the market and changes in management. It is, however, a matter that will result in greater attention to separation of duties and a review of internal controls."