Eight million Kenyans send and receive money on third-party phones

Economy

Eight million Kenyans send and receive money on third-party phones


A Safaricom employee displays the M-Pesa money transfer service on a smartphone inside a mobile phone care center in Nairobi on November 22, 2018. PHOTO | AFP

Summary

  • A study by the Global System for Mobile Communications Association (GSMA) shows that 12% of the 67.94 million mobile money users are not registered under their own name.
  • This mainly happens when underage users transact with a parent or guardian’s account, those who have lost ID cards and cannot register their lines or when criminal elements create multiple accounts to deceive the system.
  • The increased use of mobile money in Kenya has increased the risk of infiltration by criminal elements avoiding the highly regulated formal banking system which has strict ‘know your customer’ requirements.

Eight million Kenyans use other people’s mobile money accounts to send and receive money, making it difficult to track who is behind multi-billion shilling transactions.

A study by the Global System for Mobile Communications Association (GSMA) shows that 12% of the 67.94 million mobile money users are not registered under their own name and therefore transact through third.

This mainly happens when underage users transact with a parent or guardian’s account, those who have lost ID cards and cannot register their lines or when criminal elements create multiple accounts to deceive the system.

“The proportion of mobile money account owners in Kenya who have accounts registered in their name stands at 88%,” the report read in part.

The increased use of mobile money in Kenya has increased the risk of infiltration by criminal elements avoiding the highly regulated formal banking system which has strict ‘know your customer’ requirements.

This has led to numerous cases of sim card swapping scams, sim boxing, fraud and identity theft, where criminals exploit loopholes in the system to gain access to bank accounts through mobile banking apps.

Kenya had 67.94 million operational mobile money accounts as of February 2022 according to the Central Bank of Kenya, which is larger than the country’s total population of 53.7 million.

The government has forced mobile money operators to clean up their records and physically identify users in a bid to rid the country of fake accounts.

The Communications Authority of Kenya (CA) ordered a new SIM card registration exercise where millions of mobile subscribers were disconnected before the said period was extended until October.

The exercise was for the operators to validate the registration details of the respective customers.

Communications Authority Director General Ezra Chiloba said incidents of sim-boxing, financial fraud, kidnapping, terrorism and related crimes are prevalent in situations of compromised sim card registration processes .

The mobile money industry has grown into a huge industry in Kenya and Africa as a whole, but with its huge growth comes financial risks such as mobile money scams.

The Covid-19 pandemic has seen the increased use of mobile money transactions after the regulator proposed a one-year moratorium on transfer fees for trips under 1,000 shillings and users opted for digital payments instead of physical cash to contain the spread of the virus.

With the increase in transactions and use of mobile money services, cybercrime offenses are on the rise.

Official CBK data shows that in February this year, the 67.94 million registered mobile money accounts transact a total of 1.1 trillion shillings in January and February alone.

Safaricom #ticker:SCOM currently leads the market with 31.4 million active month-long subscribers, including 28 million on M-Pesa, their mobile money platform.

Some of the mobile money scams include sim boxing where attackers hide their true identities by using multiple sim cards making it difficult to track the faces behind them.

Others are SIM card swaps where criminals obtain a new SIM card registered to an existing user without their knowledge and use it to transact and borrow funds.

Some users trick users into sending them their personal identification numbers or obtain personal information which they use for identity theft before logging into bank accounts and paying their balances.

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