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#Banking

EcoCash & banks can’t magically create balances

   
24 comments

A friend brought up a question recently, can’t a software developer at EcoCash just create a balance in their account. Then, said developer can go buy a shiny new Lamborghini Gallardo LP460? (I may be adding a bit of sweetening but you get the point).

A soccer analogy

Let us talk about soccer for a second, a game which as a stereotypical nerd I do not enjoy at all. Team A which we will call Techzim Strikers is playing Team B, Newsday F.C. As the match progresses and Newsday F.C. is losing dismally, a ball boy who is clearly a Newsday sympathizer throws in a second ball into the game. Newsday FC capitalises and scores. The referee then notices that there are now two balls being kicked around by a bunch of sweaty men instead of one and he obviously stops the game.

Just like a referee monitoring a soccer match, there are checks and balances in any banking system. The first is that there are levels of privilege to every system. This clearly was not the case a few years back when a Zimra employee just went ahead and credited a couple million dollars to himself. An employee should be protected by having limited access to the systems they operate. Notice I said the employee protected, as they are less likely to do any real harm beyond just giving in to the temptation to commit a crime that will automatically be detected a few days later.

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I am a script kiddie

Say you do manage to hack in or internally create a balance. You have simply altered a display value, just like how altering the time on your watch does not make the displayed time the true one according to everyone else. There is a system of record that each transaction will either credit or debit depending on the transaction. Once you alter your displayed value according to the access credentials you have, you will have not created any actual real money.

When you transact via a digital banking platform, the system is not simply altering a figure in a couple of accounts. There are several records that a system will check to see if you have that amount of money. I am reminded of a glitch that was reporting inflated balances on the display end to the bank’s customers. Forgetting that spending money that gets credited to you even by mistake is a crime (more on this later), people hurriedly tried to spend the money but got the disappointing message, “Insufficient Funds.”

Well, our primary focus is developers and let us pretend that the system’s security is as lax as that of Zimra’s system. If a developer can go deep enough and be able to change the system of record balance, then they have created money. Well no, they have not. Even if you can change the primary system of record balance and credit money to yourself, the banking system automatically performs self-balancing using digital ledgers at the end of a predefined period. The money that came in, the money that goes out, the money in circulation and the money that is left in the system, they must all balance. Just like how our soccer match has several officials monitoring the game, there is no way that Newsday player scores the second ball without the linesman notifying the referee well beforehand.

Once a discrepancy is reported by the system the amount you created will determine what happens next. You can either be caught by other developers and internal accountants or the company will bring in a more dedicated audit team and you will have a few days to find an island where no one can get to you.

Miracle Money

In 2018, a student nurse in Gweru was sentenced to 12 years in prison after spending $54,000 that was deposited into his account by a technical glitch at CABS. His defense was that as a devout Christian who goes to a certain prophetic church, his prayers had been answered by miracle money blessings. That did not stop the Judge from sending him to jail though, with 3 years suspended on condition that he give back the house he had bought with the money.

The technical glitch came up after CABS upgraded its internal systems and a glitch reared its ugly head. The banking system was failing to correctly record figures after a bank to EcoCash wallet transfer. Since the systems are decoupled so to speak, it took a while for CABS to discover the glitch and clamp down on it, leading to the 24-year-old nurse’s arrest. Oh, and the young man had purchased two nun runner vehicles in addition to the house. Who steals money to buy two dead cars seriously? Well, the moral of the story is that even in instances where real money is involved, you will get caught, it is only a question of when.


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Comments 24

Lawrence Makanani
5 months ago

What are you realy saying

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    otg
    5 months ago

    basically he is trying to defend ecocash but the only thing for cassava/ecocash is you dont steal the way gvt steals…kkk…they will just ban your golden goose kkk…thinking ecocash was just a token based on multiple currencies and they themselves just decided to make money as long as it was possible until the gvt woke up.

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Imi Vanhu Musadaro
5 months ago

A Form 3 student could write a better article about money than this. The author has exhibited the utmost ignorance of how banking software or mobile money platforms work. They are not accounting systems, to begin with, and even if they were, they can be cooked. Why TF do auditors exist?

Banking systems and mobile money platforms are ledgers. Any ledger, physical or digital, can be altered by creating or modifying entries. You are *NOT* creating money, you are defrauding the system because you will be able to withdraw/transact with someone else’s money.

To give a fair analogy: suppose we have a communal granary (bank) where it is recorded (in a hard-cover ledger) how many buckets of maize each person has stored there. Now, the ledger keeper decides to alter his bucket count from 3 to 10. He has *NOT* created grain, but he can collect a 10 buckets of grain, and if the community has sufficiently filled their granary, this activity will not easily be discovered.

To further push this analogy: the ledger keeper, by duty, may have a higher permittance of grain they can take compared to other members of the community (who are allowed just enough for personal consumption). He can thus take 10 buckets of grain and barter them for other goods. In his bartering and re-bartering with other communities he can end up with 14 buckets of grain. He then takes the 10 of those back to his overseen granary, but only logs in 3 (his official keep) and the other 7 restore the grain levels to what they ought to be. (FYI: Don’t forget the 4 left at home that don’t change the balance of the granary system)

To push the analogy another direction: The ledger keeper can decide not to return any grain *AT ALL*. This means that the granary is down 7 buckets. But, when the granary is already packed with 100,000 buckets worth of grain, who will notice or care? Ledger keeper knows this and does it again and again and again. Till one day, someone notices the low levels, despite expected grain levels. Word gets around and community members scramble to get their grain, those that get there first get most of what was left with the remainder having to queue daily for a cup of grain. Meanwhile, the ledger keeper is keeping some grain for his earnings and “upkeep” of the granary. In order to share the little grain “fairly” amongst the remaining grain-holders, but without affecting bucket-count, it is agreed by the granary board to use a smaller bucker size for releasing grain. Resultantly, you need more buckets of grain to barter for things where fewer buckets were once required.

I could go on, but that’s enough to make my point.

Hence, there has been a move toward block-chain based ledgers where you cannot just alter records willy-nilly.

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    Van Lee Chigwada
    5 months ago

    You missed one critical step with the grain analogy. Each night, after hours, villagers from 5 different families each come in and physically count the buckets in the granary matching the total to those held by all villagers according to multiple records.

    One of the ledger keepers is then found to have 10 extra buckets to his name that only he recorded…
    I wonder what the 4 other families have to say about that.

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      Imi Vanhu Musadaro
      5 months ago

      As I said, the ledger can have a record of 10 extra buckets of grain, but that does *NOT* create grain in the granary. If the total bucket count matches the physical grain count, it means there is a misdeed in the ledger somewhere.

      And, it is impractical to physically count the grain each night, that is an arduous task bounding on an exercise in futility. What most likely happens each night or fortnight, to be practical, is a comparison of ledgers. That is how grain goes missing, people are looking at their ledgers, not the actual grain.

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        Van Lee Chigwada
        5 months ago

        Hence my decision to use a simple soccer game with just 2 balls for simplicity.

        Checks run by computers take a short time to compare the total grain in the granary vs the granary isln all villager ledgers, plus what came in and went out. If a single discrepancy is reported, it must be investigated. This will be done whether there are 100,000 tonnes of grain in the granary and only 10 extra buckets in any ledger.

        A banking system checks several Systems of Record vs deposits, withdrawals and transactions. If any discrepany is picked up, the system reports it and unless it is accounted for by floating point math errors and such, there is a problem. Even when that amount is an extra $50 in your account vs the $50 milion in the overall system of record.

        To be clear, the original question posed by the article is – Can an employee or person who gains elevated priviledges be able to get away with altering a balance to create money.

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Anonymous
5 months ago

Please hire an actual economist for economic stories, please.

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    Van Lee Chigwada
    5 months ago

    It’s less about economics, but more about whether a person with access to digital records can alter them to increase their wealth.

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Anonymous
5 months ago

Seriously, I also did not understand what the author is trying to say. You are just exposing yourself by trying to defend ecocash. You should have done a better article than this.

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    Van Lee Chigwada
    5 months ago

    The article is less about EcoCash and more about financial electronic platforms.

    I am getting that readers are coming in and tryng to tie this article to the current EcoCash/RBZ fiasco.
    The article has no relation to that. Its simply answering a question: if I have access, how easy is it to alter records to increase my wealth.

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farai Pasipanodya
5 months ago

banks do create money
the bank of England says this. Google ” bank of england money creation” publication is entitled money creation in a modern economy.

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    Van Lee Chigwada
    5 months ago

    Yes. Banks create money all the time. From loans and mortgages plus other sorts of lending schemes. Unfortunately banks are both a necessary evil and also lobby politics so control that is quite difficult for politicians.

    Here though, we are looking at creating money by altering digital banking records.

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      Anonymous
      5 months ago

      You create a loan and put the money in the account.
      Dr Loan or Treasury bill or asset
      Cr wallet account/ current account
      That money did not exist prior to the journal entry. The bank did not wait for someone to deposit cash before they can lend. Read the publication by the Bank of England. Check YouTube.

      Banks can be stopped from creating money and money creation can be transferred to democratically controllable institutions.

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Anonymous
5 months ago

Cool. I get it. It’s all about checks and balances. Question though with the system/s used by the banks: is it an industry wide system, does each bank have its own, or is it controlled by the industry regulator (in our case, the RBZ)?

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Dave
5 months ago

Appalling article, the author clearly has no understanding of the banking system, we don’t expect this from Techzim

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Anonymous
5 months ago

The best story ever. And I can relate. Unobatwa chete.

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    Anonymous
    5 months ago

    The bank of England, the great grand daddy of the banks says that it is legal for banks to create magic money by using accounting. It is what banks do. Look at the M3. About 97% is account balances. Only 3% is notes and coins. The commercial banks create the Account balances and government creates the notes and coins. Only the banks can hyperinflate. It is not the tail that wags the dog!!.

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      Anonymous
      4 months ago

      But can an individual working at the bank create money for himself or herself?

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Nkosi
5 months ago

How does the depositor of grain also become the ledger keeper. It is the custodian of the grain who keeps the ledger of what the depositor has deposited. On the case of our RTGS system the rbz keep s ledger of what each bank has deposited. No bank has access to the rbz system. The bank can only allocate it’s rbz balances to various depositors but cannot change it’s rbz balance. Even though it’s possible for a bank to allocate more to it’s depositors than is available at rbz the extra balance is not transferrable to other banks or institutions as rbz authorises these transfers first. Eg if an ecocash customer transfers a balance to his/her bank account rbz has to electronically move this money from eltje ecocash trust account to the depositors bank account. If it’s a fake balance existing at ecocash only it bounces at rbz because the rbz system does not recognise that fake money.
Secondly even if the is no request to move that balance, rbz periodically asks for returns where ecocash liabilities (total that ecocash owes depositors) is checked against what ecocash is owed in trust accounts plus physical cash. The bank holding the trust accounts is also checked against rbz balances and cash it is holding. And remember the checking is unlike physical counting of buckets of grain as it is simply adding electronic balances by computer. There are systems for that and it does not even take a minute.

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    Van Lee Chigwada
    5 months ago

    You basically paraphrased this entire article. One minor note though, how does the depositor of grain also become the ledger keeper? How does a bank employee have a bank account at the bank he/she works at? How does an Econet employee have an EcoCash account? You get it now right?

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Nkosi
5 months ago

How does the depositor of grain also become the ledger keeper. It is the custodian of the grain who keeps the ledger of what the depositor has deposited. On the case of our RTGS system the rbz keep a ledger of what each bank has deposited. No bank has access to the rbz system. The bank can only allocate it’s rbz balances to various depositors but cannot change it’s rbz balance. Even though it’s possible for a bank to allocate more to it’s depositors than is available at rbz the extra balance is not transferrable to other banks or institutions as rbz authorises these transfers first. Eg if an ecocash customer transfers a balance to his/her bank account rbz has to electronically move this money from the ecocash trust account to the depositors bank account. If it’s a fake balance existing at ecocash only it bounces at rbz because the rbz system does not recognise that fake money.
Secondly even if there is no request to move that balance, rbz periodically asks for returns where ecocash liabilities (total that ecocash owes depositors) is checked against what ecocash is owed in trust accounts plus physical cash. The bank holding the trust accounts is also checked against rbz balances and cash it is holding. And remember the checking is unlike physical counting of buckets of grain as it is simply adding electronic balances by computer. There are systems for that and it does not even take a minute.

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wyners
5 months ago

This literacy title we have is our curse,.we now think we know everything,.let’s stay within our lanes.

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Tinashe Mapfumo
4 months ago

It’s the rbz creating fake money…

Otherwise how are other countries being able to control their money….

The rbz has access to the best brains and softwares…

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Anonymous
4 months ago

best person to answer this is someone akambodya nazvo kana ariko. the real question maybe is whether the systems are foolproof or not or whether the operaters uphold good ethical conduct or not. sorry i dont know anything about this but its interesting. thanks for the details everyone.

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