Eight million Kenyans send, receive cash on third party phones

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

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

This mainly happens where users are underage transacting with a parent or guardian’s account, those who have lost identification cards and cannot register their lines or where criminal elements create multiple accounts to cheat the system.

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

Increased use of mobile money in Kenya has grown the risk of infiltration by criminal elements avoiding the highly regulated formal banking system that has stringent 'know your customer' requirements.

This has led to numerous cases of SIM card swap scams, sim boxing, fraud and identity theft, where criminals exploit gaps 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 bigger than the country’s entire population of 53.7 million.

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

The Communications Authority of Kenya (CA) ordered fresh sim card registration exercise where millions of mobile subscribers faced disconnection before the said period was extended to October.

The exercise sought to have operators validate respective customer details of registration.

The Communications Authority Director-General Ezra Chiloba had said, incidences of sim-boxing, financial fraud, kidnapping, terrorism and related crimes prevail in situations of compromised sim card registration processes.

The mobile money industry has become a huge sector in Kenya and Africa at large, but with its enormous growth, it has come with financial hazards such as mobile money scams.

The Covid-19 pandemic saw increased use of mobile money transactions after the regulator offered a one-year moratorium on transfer fees for moving less than Sh1000 and users opted for digital payments instead of physical cash to contain the spread of the virus.

With the increase in transactions and usage of mobile money services, cyber-criminal offences have been on the rise.

Official data from CBK shows that as of February this year, the 67.94 million registered mobile money accounts transact a total of Sh1.1 trillion in January and February alone.

Safaricom #ticker:SCOM currently leads the market with 31.4 million one-month active 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 identity using multiple sim cards making it difficult to track the faces behind them.

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

Some dupe users into sending them their personal identification numbers or obtain personal information which they use for identity theft before linking to bank accounts and clearing their balances.

[email protected]