Avoid Flutterwave, Chipper: CBK orders banks amid money laundering claims

Flutterwave company.

CBK Governor Patrick Njoroge said Flutterwave is not licensed to operate as a payment service provider in Kenya.

Photo credit: Pool I Nation Media Group

The Central Bank of Kenya (CBK) has ordered banks and other financial institutions to stop any dealings with payment platforms Flutterwave and Chipper Cash, a day after it revealed it had not licensed the two firms to operate in the country.

On Friday, the CBK instructed banks, microfinance banks and mortgage finance companies to immediately stop dealing with the two payment service providers (PSPs) and gave them seven days to comply with the directive.

“It has come to the attention of the CBK that Flutterwave Payments Technology Limited and Chipper Technologies Kenya Limited have been engaging in money remittance and payment services without licensing and authorization by CBK,” CBK deputy director for bank supervision Matu Mugo said in a letter to Chief Executives of banks.

“You are therefore directed to immediately cease and desist from dealing with Flutterwave and Chipper,” said Mr Mugo.

Financial institutions in the country are required to confirm compliance with the directive within seven days.

CBK Governor Patrick Njoroge said Flutterwave and California-based payment service provider Chipper Cash do not have licences to operate in Kenya.

This comes weeks after the High Court froze more than Sh6.2 billion belonging to Flutterwave and four Kenyans over fears that the money is proceeds of fraud and money laundering.

The money was spread in 62 bank accounts held in Guaranty Trust Bank (GTB), Equity, Ecobank, KCB and Co-operative Bank.

The Assets Recovery Agency (ARA) had applied to block the transfer or withdrawal of the money pending the filing of a petition to have it surrendered to the government.

“Flutterwave is not licensed to operate as a [payment service provider] in Kenya and therefore they should not be operating,” said Mr Njoroge when he addressed reporters a day after the CBK held its Monetary Policy Committee (MPC) meeting.

He said the same case applies to Chipper Cash.

Payment service providers (PSPs) are regulated by the CBK, which has oversight over the financial products they offer, and the Communications Authority of Kenya (CA), which regulates the Global System for Mobile Communications (GSM) component.

Undertaking reforms

This comes as Kenya is undertaking reforms in sectors including financial services to seal loopholes that allow corrupt government officials to steal public funds and launder their loot.

The reforms are part of conditions set by the International Monetary Fund (IMF) in its loan deal with Kenya, which is hemorrhaging public funds, making it heavily reliant on borrowing.

An IMF appraisal report said Kenya should intensify checks on corruption-related money laundering risk in banks and other sectors using financial intelligence tools.

“Anti-money laundering and counter financing of terrorism supervision should be intensified to mitigate corruption-related money laundering risk in banks and other higher risk sectors and make greater use of financial intelligence,” the IMF said.

A report from the National Treasury released on Wednesday notes that Kenya has weak systems for monitoring money laundering by politically exposed persons (PEPs) carried through money payment firms.

“There appears to be challenges with monitoring for local PEPs. There is [a] need to develop a local PEP list to assist PSPs in the monitoring of PEPs,” said the report.

The reports come as Kenya has seen significant growth in mobile money transfers locally and internationally, mobile lending, mobile banking, digital payments, online banking and online trading.

This has led to a sharp increase in cybercrime that has left authorities scratching their heads on how to combat crimes committed through the internet.