Navigating Compliance and Fraud Risk among SACCOs | Ronalds LLP
saccos-in-kenya

In the past decade, the cooperative sector in Kenya has undergone a major transformation in operations, regulation, and service delivery. The fast-paced changes in the technologies used have come with a fair share of risks, costs, and concerns by stakeholders in the sector. What is the effect of these emerging issues and trends on the success of the cooperative movement?

Digitization and automation

In improving operational efficiency and effectiveness among SACCOs, migration from manual systems to automation and digitization has been inevitable. Implementing these new automation initiatives whilst operating on existing legacy systems has created immense complexity and intricacies.

Changes in the regulatory environment

Kenya’s regulators have in the recent past increased focus on compliance with Sacco laws, anti-money laundering, and data privacy laws. Regulators refer to the establishment of an effective risk culture as a pre-requisite to effective compliance.

Big data

SACCOs are increasingly processing a large amount of sensitive financial and personal data. Analytics capabilities tools and techniques in SACCOs are required now, more than ever before,  to process vast amounts of data and turn it into useful insights that can in turn be used to achieve positive outcomes in managing and improving the effectiveness of defense mechanisms against financial crime and fraud.

Investors and creditors often assess the likelihood that a business’s future will be positive or negative using information about the past from financial statements and records. If the quality of financial reporting is poor or in their absence, investors and creditors will find it had to assess the business or even trust them enough to extend credit. 

The rise in cybercrime

Cyber breach incidences are increasingly becoming more sophisticated hence there is an elevated risk of a cyber attack, data breach, and identity theft among Saccos. Existing technologies and controls may not always be effective in guarding against these threats. Due to its dynamic nature, cybercrime management requires constant review of systems, proper training, and collaboration.

Top risks in a SACCO environment

Saccos continue to incur significant amounts in direct fraud losses, indirect losses, regulatory fines and penalties, loss of reputation and going concern issues as a result of the following key risks;

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