A Jumia Kenya employee managed to siphon approximately $150,000 (Sh21.2 million) by manipulating vendor payment records, Jumia Technologies AG, the parent company of Jumia Kenya, recently disclosed.
The incident, which was discovered in September 2022, sheds light on the risks of fraud faced by the e-commerce platform.
The employee, who has not been named, is said to have used their position to create fake vendor payments and then divert the funds into their own personal accounts. The fraud went undetected for several months but was eventually discovered by Jumia’s internal auditors.
According to Berlin-based Jumia Technologies AG’s filing with US regulators, the employee in Kenya was found to have manipulated the vendor payment entries and misappropriated payments over the course of 2021 and 2022. The employee is said to have used their position to create fake vendor payments and then divert the funds into their own personal accounts.
This incident has prompted Jumia to acknowledge the challenge of anticipating, detecting, and addressing fraudulent activities within its platform due to the large number of participants and the fragmented nature of its business. The company has stated that it is taking steps to enhance its internal controls and cash reconciliation system in order to mitigate the risk of future fraud.
This incident is not the first time Jumia has faced financial losses due to fraudulent activities. In 2019, the company reported significant financial losses of at least KSh118 million over a two-year period, attributed to consumer cyber fraud and theft. Additionally, a break-in at their Kenyan warehouse resulted in the loss of KSh56 million worth of merchandise, and fraudulent use of electronic payment providers by a group of customers in 2017 cost the company KSh62 million.
Jumia Technologies AG, which encompasses Jumia Kenya, identifies the failure to effectively deal with fraud and the occurrence of fictitious transactions on its platform as significant risks to its business. While the financial impact of the employee fraud case was not substantial, similar illegal or collusive activities could have severe consequences for the company, including financial implications, legal risks, and reputational damage.