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Kenya Accuses Two Leading African FinTech Firms of Operating Without Licenses

Richard Marley
August 05, 2022
2 minutes read
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Two of Africa’s top FinTech companies have been accused by the Kenyan central bank of allegedly conducting unlawful business in the country.

Flutterwave and Chipper Cash, two FinTech businesses that support digital currencies, are said to have been operating illegally, even though the former has denied accusations of assisting money laundering worth more than $50 million.

At the conclusion of a recent meeting of the monetary policy committee, Patrick Njuguna, governor of the Central Bank of Kenya (CBK), addressed the media and disclosed that the two didn’t have the necessary licences.

“Flutterwave is not licensed to operate remittance provider or for that matter as a Payment Service Provider in Kenya. They are not licenced to operate and therefore they shouldn’t be operating. And Chipper we could also say the same,” the governor revealed, as reported by local outlets.

Chipper Cash was established in 2018 and utilises a mobile app to concentrate on cross-border payments. Users can also purchase and trade virtual currency using it. It raised $250 million at a $2 billion value in November of last year during its Series C fundraising round, which was led by FTX, the exchange run by the controversial Sam Bankman-Fried.

Flutterwave, the most valuable startup raised $250 million in February of this year at a $3 billion valuation. Additionally, it entered the world of digital assets by collaborating with Binance to provide a fiat-to-crypto gateway. Flutterwave, in contrast to its rival, was being investigated in Kenya for allegedly enabling the laundering of at least $52 million and was already facing regulatory issues.

While Chipper Cash hasn’t responded to the claims of the Central Bank of Kenya that it has been operating illegally, on the other hand, Flutterwave has shifted the claims to the central bank.

As per the report published by Business Daily Kenya, Flutterwave claims that it applied for the Central bank’s license back in 2019. It stated: “In 2019, as our operations grew, Flutterwave submitted its application for a payment service provider licence. We have been in constant engagement with the Central Bank of Kenya to ensure that we provide all the requirements and we look forward to receiving our licence.”

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US Blocks Tornado Cash Investors for Money Laundering Risks & Links to Korean Hackers
The United States has frozen the assets of crypto investors from Tornado Cash Service, saying it helps cyber criminals to launder money.

According to a Senior Treasury Department official, over $7 billion of cryptocurrency has been laundered by North Korean hackers via the Tornado Cash service since 2019. Tornado Cash is a so-called mixer, that manipulates the stream of digital currency to cover their origins and improve anonymity.

The move generally bans Americans from using the service. Jerry Brito, from the Washington DC-based cryptocurrency thinktank “CoinCenter” tweeted that the move “appears to be sanctioning a tool that is neutral in character and can be put to good or bad uses like any other technology.”

The Lazarus Group, a hacker collective funded by the North Korean government, allegedly moved at least $455 million through Tornado Cash, according to the US Treasury. Due to its involvement in numerous prior data breaches, including the 2014 attack on Sony Pictures, the group is already subject to US penalties.

According to the Treasury, Tornado Cash was also used to launder roughly $100 million from a hack of virtual currency company Harmony in June. Pyongyang denies the claims, and the North Korean delegation to the UN in New York has not responded.

Roman Semenov, the founder of Tornado Cash, tweeted that his account had also been suspended on the website GitHub and questioned whether it was now against the law to write open source code.

Dr Aaron Lane, a senior research fellow at the blockchain innovation cluster at the Royal Melbourne Institute of Technology, told ABC News that the action would reveal trustworthy cryptocurrency investors.

“It’s a tool which people use legitimately. Can you use it illegitimately? Yes. But I’d be worried about honest users who will not be able to withdraw funds or worse … possibly face criminal sanctions,” he said.

“That’s probably not the intention, but it is one of the consequences.

“Crypto is actually straightforward to track. Whereas bank accounts are protected, I can see where you’ve transferred funds in a crypto explorer with a few clicks of a button. Without these tools, your privacy is at risk.”

Despite being asked to make changes, criminal activity on Tornado Cash had continued, the Treasury official said, Triggering Monday’s decision to impose measures.

In May, the Treasury also targeted another service, Blender, the first case of a Micer facing sanctions. Hackers have long plagued crypto platforms, and other experts say Tornado Cash has played a role.

“Tornado is a popular and important tool for cybercriminals and state-backed hacking groups,” said Dr Tom Robinson of cryptocurrency analytics firm Elliptic.

“In total, (our) analysis shows that at least $1.3 billion in proceeds of crime, such as ransomware, hacks and fraud, have been laundered through Tornado Cash.”

Dr Aaron Lane said that the US move represented the “regulation through enforcement action”

“The regulatory settings in the US and elsewhere are such that there is uncertainty, and the real solution is to have legislators pass bills in Congress.”

Suggested Read: US Court Sentences Nigerian FinTech Executives for Money Laundering Worth $167 Million

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Shufti Pro’s state-of-the-art identity verification and AML screening solutions are ideal for NFT service providers to combat rising financial crimes. These solutions allow NFT providers to determine the real identities of the customers along with the ownership records of the digital assets. Shufti Pro’s robust AML solution is powered by thousands of AI models and screens customers against 1700+ global watchlists.

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Kenya Accuses Two Leading African FinTech Firms of Operating Without Licenses

The Art Market and NFTs

The Concern of Money Laundering

Regulations for the Art Market

How NFTs are Used for Money Laundering

What Shufti Pro Offers

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