Momentum case is a big red light
R18M STOLEN OVER 10 YEARS: WARNING FOR INDUSTRY
If someone managing tens of thousands of accounts took R1 from each once a quarter, how easy would it be to pick up?
perpetrated this fraud over 10 years before he was caught.
While it would be easy to criticise Momentum for not having good enough risk management in place, other players in the asset management industry would be foolish to ignore this case. In an environment where billions of rands are in play, how easy is it to notice a few thousand slipping through the net now and again?
Part of the reason Elliot got away with it for so long is that he didn’t take large amounts at any one time and that the few transactions he engineered in his favour were a tiny fraction of the overall number Momentum processed.
“About five million transactions happen monthly,” Momentum Investments chief financial officer Theo Terblanche said. “He made about three payments to himself in a month. You need to catch those three out of millions.”
To its credit, Momentum has taken responsibility. It has fully refunded the investors who were affected and took the matter to court to ensure it was fully ventilated. Terblanche said: “We’ve been hard on ourselves and we’ve had to improve our processes.”
But he admits it was a shock that such a scenario was possible. “Before we picked this up, if you’d asked me how robust are our systems and processes, I would have told you I don’t think something like this could slip through. How many instances are there like this in the industry that are not this big or well publicised?”
This is more than a rhetorical question. If someone managing a platform with tens of thousands of client accounts found a way to strip off R1 from every account once a quarter, how easy would it be to pick up?
One of the scariest things about the Momentum case is that although only a few clients were affected, none noticed. It was only after a decade that a financial advisor raised a query as he was unable to reconcile a client’s account.