Issues with technology during a crucial data transfer led to customers of Kenya’s largest bank, the KCB Group, being able to withdraw amounts exceeding their account balances. Customers withdrew approximately $7.7 million (KES 1 billion) between October 11 and 31, as reported by sources familiar with the situation.
The bank has frozen the accounts of customers who went overdrawn and has informed them, according to individuals familiar with the matter. The bank is also considering involving loan recovery agencies. Following the transfer of its databases from on-premise to a colocation center, the bank encountered challenges when attempting to synchronize its cloud databases, resulting in a synchronization error.
One source familiar with the situation explained, “Following the server migration, account balances were not updating in real-time at the backend, allowing customers to overdraw their accounts.”
Accounts linked to KCB-M-Pesa target savings, which offer short-term loan access and savings features, were the most affected. “Customers could withdraw up to triple the saved amount,” stated a source with direct knowledge of the accounts.
The technical issues, lasting over three weeks, highlight the bank’s difficulties in modernizing its IT infrastructure.
An urgent notice sent to KCB staff during the crisis revealed that employees sometimes faced challenges in “accessing affected systems,” resulting in service interruptions lasting hours or total outages.
KCB Group chose not to provide a comment.
During a crisis meeting on October 12, top executives deliberated on how to address the problem and explored options for recovering the lost funds. Subsequent meetings have been held by the bank to address the situation.
Fraud remains a significant concern in Kenya’s financial services sector, with banks reportedly losing around $130 million annually, according to credit reporting agency TransUnion Africa.
Many cases of banking fraud go unreported, as institutions resolve them discreetly, with the oversight of the Central Bank of Kenya (CBK) and other financial regulators. In 2023, Kenya’s Financial Reporting Centre (FRC) identified over $600 million associated with card fraud, corruption, and terrorism.