The United States Department of State has expressed worry that Africa’s prolific mobile financial platforms – Mobile Money could be exploited and used by money launderers across the world.
Mobile money providers like M-Pesa, MTN Mobile Money among others have revolutionized the banking sector in many ways, boosting financial inclusion across the African content and created steep competition for the conventional Banks.
The introduction of cross border money transfers, mobile loan and savings services among others have helped extend banking services to even the traditional people who could not afford opening up a bank account.
In Uganda, MTN mobile money users can now send Money to MTN Rwanda users, M-Pesa users in Kenya and can equally receive.
Currently, M-Pesa users can receive or send money internationally following partnerships struck between Mobile Money service providers.
The US State Department says diaspora remittances to Kenya totaled $1.55 billion in 2015 and $862 million between January and September 2016. It points to the 159,000 mobile-money agents in Kenya, mostly working on the dominant M-Pesa system as well as the over 10 million accounts on M-Shwari, Safaricom’s online banking service.
“These services remain vulnerable to money laundering activities,” the report states.
This is backed up by Kenya’s standing as “a transit point for international drug traffickers and trade-based money laundering.”
Safaricom maintains that it works with the Central Bank of Kenya and other regulators to review the systems and regulations in place to ensure they meet the “highest global standards.”
The company is subject to the Proceeds of Crime and Money Laundering Act, 2012 and regularly files reports with the country’s Financial Reporting Centre.
Besides monitoring all transactions to detect and report suspicious activity, the telco says its partners are equally required to undertake due diligence on remitters in line with their respective countries’ anti-money laundering regulations.
The US State Department however points out that tracking and investigating suspicious transactions within mobile payment or banking systems remain difficult despite the checks already in place.
“For example, criminals could potentially use illicit funds to purchase mobile credits at amounts below reporting thresholds.”
Since the launch of M-Pesa in Mar. 2007, there has been a proliferation of mobile money services across the world by different operators. M-Pesa currently operates across 10 countries.
Last year, $33.5 billion was transacted through M-Pesa up from $28.2 billion in 2015. The scale of such transactions and M-Pesa’s deep entrenchment in the economy has authorities worried of potential consequences if the system collapsed. Despite such concerns, enormous growth potential continues to attract more players including the recently launched PesaLink.