CBK warns of cell cash fraud threat on unverified SIM playing cards

A sim card registration train. PHOTO | FILE | NMG

The Central Financial institution of Kenya (CBK) has warned cell cash service suppliers (MMSPs) and banks of the rising threat of fraud from distant registration of consumers.

The CBK stated in a round that digital onboarding of consumers was denying cell cash gamers, together with Safaricom, Airtel and Telkom Kenya, an opportunity to confirm that the individuals sending and receiving cash are the identical ones that registered on their platforms.

Within the round issued final November and made public this week, the regulator reminded monetary establishments to tighten their anti-money laundering and counter-terrorism financing (AML/CFT) checks to cut back the dangers concerned in distant onboarding of consumers.

Learn: Treasury needs firms to rent anti-money laundering officers

“Platforms that facilitate digital on-boarding equivalent to cell cash platforms have been the topic of fraud as a consequence of forgery of paperwork and id theft,” stated Gerald Nyaoma, the director of banks supervision at CBK, within the round.

“This vulnerability is because of the truth that MMSPs don’t establish the shopper and confirm that the shopper who registered the SIM with the service supplier, is similar one looking for to entry cell monetary providers. MMSPs ought to handle this vulnerability as a matter of urgency.”

Cell cash providers equivalent to Safaricom’s M-Pesa have grown in stature within the monetary providers sector and are interlinked with banks, micro-finance banks and saccos, which means that any threat on their finish can discover itself into the remainder of monetary establishments.

M-Pesa transactions grew by 21.4 p.c to Sh35.86 trillion within the monetary 12 months ended March 2023 when the variety of transactions elevated by a 3rd to 21.03 billion, pointing to the elevated reliance on the service within the financial system.

The CBK in September final 12 months elevated the every day cell cash pockets measurement from Sh300,000 to Sh500,000 and in addition elevated the every day transaction restrict from Sh150,000 to Sh250,000 in keeping with elevated utilization. Kenya had 77.12 million registered cell cash accounts on the shut of November final 12 months.

Learn: Cell cash funds hit seven months excessive on accounts progress

Mr Nyaoma stated monetary establishments equivalent to MMSPs have an obligation to correctly establish clients throughout distant or digital on-boarding and provides that requesting and receiving photocopies of identification paperwork can’t be synonymous with figuring out the individual.

Airtel and Safaricom relied closely on on-line portals to register and replace clients’ particulars after the regulator in 2022 threatened to deactivate SIM playing cards whose house owners didn’t comply.

The principles require telcos to report full names of consumers, ID quantity and date of beginning, gender and bodily handle of subscribers. However using digital registration instruments has left the telcos with little room to know if these registering are utilizing their very own paperwork or not.

The usage of digital registration helped telcos to keep away from the lengthy queues that have been being witnessed throughout the nation as subscribers rushed to keep away from deactivation.

Safaricom, as an illustration, says within the newest annual report that using automated know-your-customer replace elevated compliance from 55 p.c in February 2023 to 97 p.c in March 2023, leading to financial savings of Sh50 million.

The CBK says that whereas some establishments have employed biometric verification for distant on-boarding, they need to devise different reasonably priced strategies to allow them to establish clients to be on-boarded just about or remotely.

It says monetary establishments, together with MMSPs, ought to guard towards people who search to make use of different individuals’s fraudulently obtained identification paperwork for functions of opening accounts.

Learn: Stepping up cash laundering conflict

Monetary establishments depend on nationwide id playing cards or legitimate passports to establish clients, largely within the foreign exchange bureaus and cash switch providers. Nonetheless, the CBK has cautioned cell cash switch companies from making use of this technique.

“This could not apply to MMSP. MMSPs shouldn’t apply simplified buyer due diligence to all particular person clients with none regard to the various dangers posed by them,” stated Mr Nyaoma.

The CBK round, which additionally roped in banks, has reminded monetary sector gamers to strictly implement the AML/CFT (Modification) Act 2023, Proceeds of Crime and Anti-money Laundering Laws 2023 and Prevention of Terrorism Laws 2023 that set in final 12 months.

Kenya went by a mutual analysis of its anti-money laundering and combating of terrorism financing and countering proliferation financing regime by the Japanese and Southern African Anti-Cash Laundering Group from October 2021 to July 2022.

The nation was referred to the Monetary Motion Taskforce’s Worldwide Cooperative Overview Group course of as a consequence of poor ends in its mutual analysis and was beneath a interval of statement for one 12 months to October 2023 throughout which it was required to take motion to deal with deficiencies.

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