09/07/2020
In February 2012, Shehata, 31 years old at the time, took out a life
insurance policy with the Egyptian Takaful Insurance Company (Hayat),
for 500,000 Egyptian Pounds (approximately $81,000 at the time). The
insurance money, to be paid-out to his family after his death, would
be in monthly instalments of E£7,560 (~$1,200). Six months later,
Shehata took out a second life insurance policy for the same amount.
Less than a year later, his family presented his death certificate to
the two companies, to collect the cash amount of both policies. This
raised suspicion and led the company to file a report with the
Administrative Control Authority and the Public Fund Investigation
Bureau against the heirs.
In addition to the death certificate, Shehata’s family presented a
medical report issued by a Health Department in the village of Bani
Mazar in Assiut, stamped with the Ministry of Health’s seal, and
signed by a health inspector. The report stated the cause of death as
hypovolemic shock caused by a heart attack. However, according to the
company’s managing director, Hisham Abdel Shakur, the prosecution’s
investigations revealed that Shehata was still alive, and that the
company had fallen victim to a mastermind fraud scheme, from which
Shehata and his family pocketed E£107,500 (~$17,500) — as a first
pay-out. He stated in a press conference that Shehata was part of an
organised crime ring of death fraud causing insurance companies losses
mounting to E£5 million.
ARIJ monitored deaths between 2012 and 2020, during which fraudsters
used fake medical reports and death certificates to reap millions of
pounds from life insurance companies. ARIJ’s investigation also found
how official documents are forged through the exploitation of
loopholes in the Civil Status Law, in order to obtain compensation.
This fraud prompted reinsurance companies to withdraw from the
Egyptian market after incurring financial losses, amid poor oversight
on the part of the Ministries of Health and Interior, as well as
regulatory bodies, and the absence of modern technological tools to
detect fraud and theft crimes.
A contract whereby the insurer is obligated to pay to the insured, or to the beneficiary, for whose interest the insurance contract was stipulated, a sum of money, a regular income, or any other financial compensation in the event of the occurrence of the accident, or of the risk stated in the contract, whether injury or death, in consideration of a premium or any other financial payment made by the insured to the insurer. The lump sum of the life insurance policy will only be disbursed in the event of death.
Source: The official website of The Egyptian Financial Regulatory Authority for 2019 Annual book 2018-2019
Head of the Insurance Department at Cairo University’s Faculty of Commerce, Sami Naguib, explains that there are two types of Insurance; the first, is the individual agreement through an insurance policy, whereby the insured pays a monthly premium, and the company pays him the cash value of the policy in the event of disability. The company will also pay his family the cash value of the policy after his death, provided that they present the death certificate and inheritance claim. He clarified that insurance pay-outs depend on the type of death, which would increase in the case of a "natural death" and would decrease in the case of a criminal death. The second type is the common social security that the state guarantees to all workers.
Annual book 2018-2019 (All amounts in E£)
According to Mahmoud Sami, secretary general of the Egyptian
Insurance Federation — a government federation that consists
partly of insurance companies — the percentage of losses from life
insurance fraud rose from 11% in 2017 to 18% during 2019, an
increase of 7% in a period of less than two years. While he
estimated the losses to have reached E£50 million in the last two
years, he described those losses as "small" compared to the size
of the insurance companies’ premiums.
The former head of The Egyptian Financial Regulatory Authority,
Sharif Sami, explained that the insurance premiums that those
insured pay periodically are one of the most important sources of
investment funding in the country. According to an information
bulletin issued by the Egyptian Insurance Federation on December
22, 2017, fraud is one of the most important challenges impacting
the insurance industryin Egypt, and 54% of life insurance
companies said that fraud constitutes the number one risk their
operations face. In 2016, the Moroccan Central Reinsurance
Company, SCR, withdrew from the Egyptian market. When asked for
the reason behind its withdrawal from the Egyptian insurance
market, the company’s representatives said that it was due to the
increasingly high premiums, and cases of fraud that exceed what
insurance companies were used to.
Source: The Egyptian Financial Regulatory Authority official website
In 2016, the Moroccan Central Reinsurance Company, SCR, withdrew from the Egyptian market. When asked for the reason behind its withdrawal from the Egyptian insurance market, the company’s representatives said that it was due to the increasingly high premiums, and cases of fraud that exceed what insurance companies were used to.
Reinsurance companies operating in the Egyptian market, according to the official website of Egypt’s Financial Supervisory Authority
Reinsurance companies are
global companies that contract Egyptian insurance companies, and
get a share of the insurance premiums in exchange for assuming
part of the cash value of the insurance policy after the insured
client’s death, or his exposure to any incidents that allow for
the disbursement of the funds...
The Moroccan company estimated life insurance companies’ losses at
$2.2 billion, and attributed it to the poor capabilities of
confronting fraudulent methods, as well as the backward technological
systems used.
Sami Naguib explained that to carry out insurance fraud, the fraudster needs a fake but documented and dictated death certificate with official seals, in order to present it to the insurance company and collect the value of the policy. The fraudsters will take all steps needed for issuing the certificate officially, however along the way he needs to falsify some of the steps or documents, as this investigation reveals.
Sources
1- Articles No. (4/28/386) of the Civil Status Law No. 143 of
1994.
2- Dr. Hassan Aref, Health Inspector Ms. Zainab.
In the event of a criminal death, the health inspector informs the
Public Prosecution, who assigns a forensic doctor to examine the
deceased and determine the causes of death.
Amid an unrelenting wailing, 35-year old Shalqami, asked the
inspector at the Bandar Al-Minya health office to issue a death
certificate for his wife, Amina, while presenting a false medical
report dated May 14, 2018, with no hospital notification of her
death. He explained that the hospital refused to give him the
notification for his wife’s death during an outpatient procedure of
"soft tissue" biopsy. (As shown in the case documents).
The health inspector eventually gave in to Shalqami’s begging and
issued the death certificate and burial permit, without seeing any
hospital documentation or official notification.
Article 40 of the Civil Status Law states: “The employee of the competent health authority receiving death notifications must verify the identity of the deceased, and complete the data and documents required to confirm the death.”
Head of Bandar Al-Minya Health Office, Hani Ishaq, says that by
reviewing the civil death registry during the year, he found the
woman’s name and death-related documents, but did not find the
notification which the University Hospital usually sends to the
health office after a death.
Ishaq filed a report with the Public Prosecution office for the year
2018, after the husband requested that the Health Office issue a
cause of death document, to present it to Nasser Social Bank (a
government bank), in order to collect the value of an insurance
policy in the amount of E£100,000, which Amina did not pay off
before her “death” .
Investigations conducted by the prosecution revealed that the woman
was still alive and had moved from the Minya Governorate to the
Hawamdiya area in Giza, after the husband faked a University
Hospital medical report and a health inspector assisted him in
issuing the death certificate without a hospital verification.
The husband was sentenced in absentia to 20 years in prison, while
Amina was sentenced to 10 years. They had already collected nearly
E£250,000 from a loan, the insurance policy, the end of service
bonus and the government pension for several months. The health
inspector was sentenced to three years, according to the case
documents and Hani Ishaq.
Health offices of the Preventive Medicine Department in Egypt’s
Ministry of Health and Population, in all governorates of the
republic, are the main source of data related to more than 100
million Egyptian citizens, and are responsible for issuing birth and
death certificates, as regulated by Law 143 of 1994.
“Falsification of the death certificate passes through three people:
the insured, a health inspector, and a broker/intermediary between
them,” explains Dr. Hani Ishaq, the health inspector of Bandar
Al-Minya, and the former head of the Governorate's Free Therapy
Department.
Ishaq says that a loophole in the Civil Status Law allows health
inspectors to register deaths based on medical reports from
government hospitals, private hospitals, or a private doctor, which
allows for more tampering with the death registration.
Ishaq points out that these medical reports are easy to tamper with
and forge. In cases of home deaths, the health inspector must
examine the body and verify the death and its cause. However, this
does not happen often. Ishaq attributes this to the fact that a
health office records between 15 to 20 deaths per day, whether death
occurs at home or at a hospital, were due to an accident, or
criminal activity.
Hassan Aref, a retired health inspector who worked for years in the
office of Sayyida Zainab confirms Ishaq’s statement. In an interview
he said: “85% of health inspectors do not personally perform a
medical examination on the deceased to verify the cause of death and
the identity of the deceased. They issue the burial permit and the
medical report from their offices."
However, negligence is not the only cause. Ishaq accuses "some
health inspectors of participating in fraud and accepting financial
bribes ranging between E£100 and E£500, to issue death certificates
without verification, notifications or entries in the death
registry," all this, in the absence of periodic monitoring and
inspection from government agencies.
Ishac chaired a committee to screen death certificates in Minya
Governorate, which found that 36 false death certificates were
issued during 2016 and 2017.
In March 2020, police report No.1195 of 2020 from Sayyida Zainab,
supported Ishaq’s findings, as it revealed that employees of the
Sayyida Zainab Health Bureau issued a false medical report, a burial
permit and a fake death certificate for a person named Shawish, to
collect the cash value of an insurance policy in the amount of E£20
million ($1,300,000), collected by the person who staged the "fake
funeral" himself, a month before reporting his death. Investigations
are still ongoing.
When confronted, Mohamed Abdel-Fattah, head of the Central
Department of Preventive Medicine at the Ministry of Health and
Population, the department which monitors the work of health
offices, did not deny the involvement of some health inspectors in
tampering with death certificates: “There are definitely the weak
spirited, and the fraudulent here an there and they will continue as
long as the human element is controlling the system.”
Abdel Fattah added that the plan to digitize health offices date
began in February 2020. It aims to transfer all paperwork
transactions from paper to electronic, to curb fraud and corruption
in death and birth registration. He stressed that the electronic
transformation will reveal falsification and fraud attempts of
official documents in health offices.
In February 2020, the Ministry of Health announced the automation of
4,571 health offices in Egypt tasked with registering births and
deaths.
We contacted a mediator or a so called broker involved in issuing official forged documents. During several recorded phone calls, we requested a death certificate for a person who is still alive to present to an insurance company. His response was that for E£25,000 ($ 1600) he could provide a death certificate sealed with the stamp of the Ministry of Health from a health office, but it would not be recorded in the civil registry. We requested that he records it in the civil registry, and he said: "I will try."
An easier way for the mediator would be to issue a death certificate not entered in the civil registry, but stamped with the seal of the Ministry of Health, obtained through "one of his friends", as he puts it, in one of the health offices. The broker recommended presenting it to the company and attributing the lack of entry into the registry to the slow pace of procedures. He insisted that in the end, the company will accept the certificate because of the stamped seal of the Ministry of Health and its approval by the Health Office.
The manipulator of birth and death certificates shall face
imprisonment for a period not exceeding three years or a fine of
no less than E£500 ($30), and anyone who falsifies procedures
related to death and inheritance shall face imprisonment for a
period not exceeding two years or a fine not exceeding E£500
($30).
Article 222 of the Penal Code stipulates that every doctor or
surgeon who gave by way of courtesy a false certificate,
statement, or report regarding pregnancy, illness, impairment,
or death, knowing that it was false, shall face imprisonment or
pay a fine not exceeding E£500 ($30). However, if his intention
in preparing a false report was in exchange for a bribe or
gifts, he will face life imprisonment and a fine of not less
than E£1,000.
Mohamed Othman, an insurance examiner at Misr Insurance Company told
us that in 2013 within the Sharkia governorate, Essam’s family
presented to Misr Insurance Company - the oldest state-owned life
insurance company - a death certificate accompanied by the health
inspector’s "natural death report”, and requested a payment of E£5
million (~$740,000 at the time), which was the cash value of an
insurance policy. Essam had only paid off E£200,000 (~$29,000 at the
time) in premiums, before travelling to Italy, where he supposedly
died.
Essam’s family collected E£3 million, as a first payment of the
policy’s cash value, pending the completion of related documents.
Othman said that because the death was “natural”, the death
certificate was sent to the investigation department in the
insurance company to verify the authenticity of the certificate,
only to discover after investigation, that Essam was still alive.
He added that in 2013, the company sued Essam’s family before the
Cairo Criminal Court, for falsifying official documents. In 2015,
they were sentenced to six years in prison, according to Othman.
Othman points out that the investigation department of the insurance
companies undertake verification steps related to the authenticity
of the policy holder’s death from the beginning to the end, they
make enquiries at his place of residence and at his workplace. He
explains that the Ministry of Interior is involved only in the event
of the invalidity of the death certificate, where the case is
referred to the prosecutor’s office for further investigation, which
in turn assigns it to the criminal investigations department for
examination and investigation.
He added that the Department of Investigations carries the same
duties as that of a criminal investigation, in inquiring about the
deceased and the authenticity of the documents presented. Their work
begins when the company’s management deems the claim as
“suspicious”, due to the short period of time that has lapsed
between the date of taking out the insurance policy and the reported
death. An investigation is carried out by the administration to
verify the death certificate and the burial permit, without
resorting to agents of the law unless the suspicion of fraud are
proven to be correct.
However, a security source in the civil status department, who
requested to speak anonymously, said that the Civil Status
Inspection and Monitoring Unit, accompanied by the Criminal
Investigation Unit of the police, routinely conducts unannounced
visits to branches of the civil registry offices to check for any
violations, adding: "Cases of forgery of official documents are
usually committed by individuals and not the system. Forgery and
bribery cannot be controlled,” attributing it to poor oversight.
He added: "Some employees forge seals, so that the forged documents
appear authentic." He said that the Ministry of Interior has a plan
to transform 90% of daily processes into electronic form, explaining
that the digital system reduces the forgery or the issuing of
fraudulent documents.
“The law does not protect the dupes,” explains Subhi Shehata, a
member of the Public Relations and Media Department, of The
Financial Regulatory Authority, responsible for supervising and
regulating non-banking financial markets and instruments, including
the insurance sector. He denied the authority’s involvement in
handling fraud on behalf of insurance companies: “There is no
regulatory entity in the world that can verify the death is real, it
is not the authority’s job to verify the authenticity of the
document or the validity of the compensation.”
He explained that one of the roles of the Financial Regulatory
Authority is to resolve contractual disputes and complaints between
those who are entitled to insurance payments and companies. He said
that he Authority received 600 complaints in 2016 and 2017, the
majority of which relate to the companies' delay in disbursing
insurance pay-outs, approximately 90% of which the authority ruled
in favour of insurance companies.
He further added: "Every company that has a criminal intelligence
and legal affairs department, and a disbursement unit, should be
held accountable in the event of unlawful pay-out,” and stressed the
need to hold the managing director and the board of directors of
such companies accountable, or recourse to the judiciary and not to
the financial authority.
In reality however, fraudsters will continue to pocket huge amounts
in life insurance pay-outs; and insurance companies will continue to
suffer losses; and the cost of life insurance for Egyptians will
continue to rise as long as the mechanism to commit fraud using
falsified documents to obtain life insurance policies pay-outs
continue to thrive within Egypt.
