After operating 7 years collectively as cross border payments processors, the Central Bank of Kenya (CBK), said Flutterwave Inc. and Chipper Cash are not licensed to operate.
“Flutterwave is not licensed to operate as a remittance provider or for that matter as a PSB service provider in Kenya. They are not licensed to operate and therefore they shouldn’t be operating. We can also say the same for Chipper Cash,” CBK’s Governor, Patrick Njoroge, said yesterday (July 28) in Nairobi.
This comes after a court in Kenya froze more than $40 million in 52 bank accounts owned by Flutterwave over money laundering charges leveled up against it by the Kenyan Assets Recovery Agency (ARA).
Flutterwave in Kenya
- Flutterwave, a Pan-African financial technology company founded in 2016 by Iyin Aboyeji and Olugbenga Agboola (GB) launched its flagship product, Barter in Kenya in 2018.
- A fresh wave of scandal recently hit the fintech giant after ARA stated that there was neither evidence of retail transactions from customers paying for goods and services. Furthermore, there was no evidence of settlements to the alleged merchants.
- Flutterwave quickly debunked the claims, saying they were politically motivated up close to Kenya’s presidential Elections.
- The fintech giant also said that it maintains the highest regulatory standards in its operations. “Our Anti-money laundering (AML) practices and operations are regularly audited by one of the big 4 firms,” the company posited in a blog post.
- Chipper Cash, a free cross-border payments processor founded in 2018, the fintech company recently raised $100 million in a Series C round with Jeff Bezos as an investor. Leonn Kiptum, the Country Director for Chipper Cash in Kenya, had earlier in January told HapaKenya that the company had applied for the International Money Transfer Operator (IMTO) License and was “waiting to be issued with because we have met all the requirements.”
- CBK’s statement now shows that the license has yet to be issued.
Implications of the statement:
This explainer is based on a two-sentence hint, leaving room for wild guesses. And while we await further insights from CBK and the companies mentioned, here’s what you should know:
- There are a diverse bodies that regulate fintech products and services in Kenya, the Central Bank of Kenya; the Communications Authority of Kenya; the Capital Markets Authority; and the Competition Authority.
- The CBK is the top license issuer in mobile money products and exercises oversight directly over payment service providers. Fintechs are also cautioned to actively exercise due diligence and conduct constant legal compliance audits to avoid violating the law.
What does this mean?
Becoming a payments processor is no easy undertaking and Kenya as any other society regulates the players in the industry to protect the data and privacy of users, prevent fraud and ensure the safety of payments. This is to To become a licensed player, CBK (PDF) highlighted the procedures including;
- An application for authorisation to CBK and a 30-day period to ensure the complete certificate.
- Approval of company name and product
- Authorisation of company and other legal courses.
- A two-month renewal window before expiry of license.
These processes are rigorous to ensure companies deliver efficiently. And for foreign companies, the screw is tightened more to include historical background of the foreign entity, other Letter of no Objection from the Home Supervisory as well as other checks.
This means that no payments processor can survive long without any license and 7 years is too long a time to lax. It leaves to be wondered if:
- Flutterwave and Chipper Cash in a highly implausible sense was never at any time licensed to process payment.
- Or did their licenses expire as CBK states that licences must be renewed 2 months before expiry?
Is it then possible to operate in Kenya without a license?
In a series of tweets, Osaretin Victor Asemota, co-founder of SwiftaCorp, a technology service delivery company, explained that CBK only recently in June 2021 began issuing licenses to age-long payments processors in Kenya.