The waters are still choppy for Flutterwave with further allegations of money laundering faced in Kenya.
A suit was recently filed by Kenya’s Assets Recovery Agency seeking to freeze more than Kenya Shillings 6.2 billion held in several accounts belonging to the Nigerian start-up and four Kenyans on fears they were proceeds of card fraud and money laundering. The billions in Guaranty Trust Bank (GTB), Equity, EcoBank, KCB and Co-operative Bank accounts were frozen by a court order dated 1st July pending the filing of a petition to have the money forfeited to the Kenyan government.
“These orders shall subsist for a period of 90 days as provided in section 84 of Proceeds of Crime and Anti-Money Laundering Act,” Judge Esther Maina said in a ruling pending a full hearing and final order.
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Flutterwave responded stating that the claims of financial impropriety in Kenya were “entirely false”. It averred that its operations were regularly audited and it continuously engaged regulatory agencies to stay compliant.
On 28th July, Patrick Njoroge the Governor of the Central Bank of Kenya (CBK), Kenya’s monetary authority, said during a Monetary Policy Committee (MPC) meeting that Chipper Cash and Flutterwave were not licensed to operate in Kenya. “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,” Njoroge said at the time.
The next day, the CBK sent out a circular directing all financial institutions to cease doing business with the two fintechs with immediate effect.
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“It has come to the attention of the Central Bank of Kenya (CBK) that Flutterwave Payments Technology Limited and Chipper Technologies Kenya (Chipper) have been engaging in money remittance and payments services without licensing and authorization by CBK…You are therefore directed to immediately cease and desist from dealing with Flutterwave and Chipper,” said CBK’s bank supervision deputy director, Matu Mugo in the circular.
The CBK sanction on Flutterwave and Chipper Cash does not only restrain them from associating with the financial institution but includes other Kenyan-based corporate entities from partnering with Chipper Cash and Flutterwave. For context, Flutterwave Payments Technology Limited and Chipper Technologies Kenya cannot do business with other Kenyan-based companies either by platform integration or partnership.
This has crippled Flutterwave’s operations in the Kenyan market which have been through partnerships with banks and mobile network operators licensed by the CBK pending issuance of its payment service provider licence applied for in 2019.
In response to the ruling and directive, Flutterwave hinted at a witch hunt by the Kenyan authorities. This is a sentiment echoed by award winning journalist David Huyendin’s in his recent tweet stating that the Flutterwave case will be ‘buried’ under newly elected President Ruto’s regime.
Flutterwave announced that it is launching its own investigation into the motive of the claims made against it. It affirmed its commitment to the ‘integrity of the ecosystem’ and its stakeholders, and that it is striving to ‘have the records straightened’.
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But can it really bounce back from all the heavy allegations? Only time will tell.
Meganne Ngarachu is a licensed lawyer based in Nairobi, Kenya.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh