A Kenyan court has frozen KES400.6 million ($3.3 million) in accounts belonging to Nigerian payment company, Flutterwave, over allegations of money laundering and card fraud.
The court granted the Asset Recovery Agency’s (ARA) application on August 25 to prevent Flutterwave from transferring or withdrawing the funds in three bank accounts, including two in UBA and one in Access Bank; and 19 Safaricom M-Pesa paybill numbers.
Iyin Aboyeji, co-founder, Andela and Flutterwave
This recent freeze emanates from the case in July when the Kenya’s Asset Recovery Agency (ARA) got a court order to freeze 56 bank accounts which seven companies had used to launder KES7 billion (~$59.2 million). Fifty-two of the bank accounts—holding KES7 billion—belonged to Flutterwave.
At the time, the ARA alleged that Flutterwave had no records of providing merchant services in Kenya. It also claimed that fintech was operating a payment service platform without authorisation from the central bank of Kenya (CBK), a claim which the CBK itself confirmed.
The CBK went further to order Kenyan commercial banks, microfinance banks, and mortgage finance companies to immediately end their partnerships with fintech unicorns, Flutterwave.
In this latest case, the ARA filings revealed that in one of Flutterwave’s UBA bank accounts, debits amounting to KES136 million included chargebacks, reversals, and refunds which indicated that they were being used for card fraud. The agency also said the conversion of dollars into shillings in that account, in a transaction worth KES231 million, pointed to “a scheme of layering and intermingling”.
The court froze funds worth KES400.6 million ($3.3 million) across three banks including UBA, Access Bank, and Safaricom M-Pesa.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
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.
Co-founder of Andela and Flutterwave, Iyinoluwa Aboyeji
“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.
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.
“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’.
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
Four years ago, in 2018, Nigerian payment startup Flutterwave announced it had expanded to the East African country of Kenya. But it appears the startup have come to an abrupt end in the country. This is because the Central Bank of Kenya (CBK) has, in a letter to Kenyan CEOs, ordered Kenya banks and microfinance institutions to stop doing business with payments technology companies Flutterwave and Chipper Cash.
CBK governor, Patrick Njoroge
In the statement, the regulator instructed banks to break ties with the fast-growing payments unicorns, which may include cancelling all accounts and freezing funds. The lenders must return to CBK within seven days.
“It has come to the attention of the Central Bank of Kenya (CBK) that Flutterwave Payments Technology Ltd and Chipper Technologies Ltd have been engaging in the money remittance business without licensing and authorisation by CBK,” the letter reads. “Money remittance services in Kenya are regulated pursuant to the Central Bank of Kenya Act and the Money Remittance Regulations, 2013. Further, money payment services in Kenya are regulated pursuant to the National Payment System Act and the National Payment System Regulations, 2014.”
This comes just days after the CBK governor told journalists at a meeting of the Monetary Policy Committee (MPC) that the two companies are not licenced to provide remittance and payment services in the country.
Here’s What You Should Know
The rule might spell the end of payments technology businesses aiming to leverage the country’s fast-growing multibillion-dollar online payment market.
The two unicorns have rapidly expanded across the continent in recent years, much to the dismay of regulators, who accuse them of promoting fraud and transporting illicit currency with low rules.
The Assets Recovery Authority (ARA) is now investigating Flutterwave for money laundering, and it is unclear whether the company has regulatory authority to operate in the country.
The High Court froze more than Sh6.2 billion in 62 bank accounts belonging to the Nigerian start-up and four Kenyans earlier this month, citing concerns that the funds were the results of card fraud and money laundering.
The ARA applied to prevent the transfer or withdrawal of billions in Guaranty Trust Bank (GTB), Equity, EcoBank, KCB, and Co-operative Bank accounts, pending the filing of a petition to have the money forfeited to the government.
Olugbenga Agboola and Iyinoluwa Aboyeji founded the payments technology startup in 2018 and have offices in Lagos, Nigeria and 1323 Columbus Avenue, San Francisco, California.
After Nigeria, Kenya is the firm’s second-largest market.
In February, the company secured Sh28.41 billion in a Series D fund drive, primarily to finance mergers and acquisitions in the continent’s booming payments market.
Chipper Cash was launched in 2018 by Ham Serunjogi of Uganda and Maijid Moujaled of Ghana to provide rapid cross-border mobile money transactions in Africa.
The company is headquartered in San Francisco, California, and has secured around Sh35.9 billion ($302.2 million) in investment, the most recent of which being a Series C round in November of last year.
The platform provides peer-to-peer payment services in nine countries, including Ghana, Uganda, Tanzania, Rwanda, Nigeria, South Africa, and Kenya. Other countries include the United States and the United Kingdom.
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
All is not well with leading African fintech startup Flutterwave, this is as the Central Bank of Kenya (CBK) says that the startup is not registered to operate in Kenya. This is as the CBK governor Patrick Njoroge said that the company, as well as Chipper Cash, are not allowed to offer payment services to merchants in the East African country.
“Flutterwave is not licensed to operate remittance providers or for that matter as a Payment Service Provider in Kenya. They are not licensed to operate and therefore they shouldn’t be operating. And Chipper we could also say the same,” Dr. Njoroge said.
CBK Governor Patrick Njoroge
Flutterwave is also facing money laundering and fraud allegations in the country, which it has denied. According to TechCrunch, a total of $52.5 million in 62 accounts linked to Flutterwave and six other companies that are recipients of wire transfers from fintech was blocked by the country’s High Court, and Kenya’s Asset Recovery Agency applied to have them frozen.
Earlier this year the fintech company got permission from the Bank of Tanzania (BoT) to launch its payment services in Tanzania.
On its website, the company says it is currently operating in 34 African countries including South Africa, Ghana, Nigeria, and Kenya. It is not clear if it gained the required approval to operate in the said countries.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry
A Kenyan High court has frozen 56 bank accounts holding a whopping Sh7 billion suspected to have been laundered by foreign nationals.
The orders were issued after the Asset Recovery Agency (ARA) told the court that the accounts for seven targeted companies were used as conduits for money laundering in the guise of providing merchant services.
The accounts that have been frozen are in USD, British Pound Sterling, EURO and Kenya shillings.
Co-founder of Andela and Flutterwave, Iyinoluwa Aboyeji
The companies listed are Flutterwave payment technology limited, Boxtrip travel and tours limited, Bagtrip travel limited, Elivalat fintech limited, Adguru technology limited, Hupesi solutions, Cruz ride auto limited and one Simon Ngige.
According to the court documents, Flutterwave was registered on February 23, 2017.
Its directors are listed as Olugbenga Agboola, David Mouko (Kenyan) and Flutterwave Inc.
The company operated 29 bank accounts with Guaranty Trust Bank, 17 with Equity Bank and 6 with Ecobank.
The Agency says the company’s account received billions of shillings and the same was deposited in different bank accounts in an attempt to conceal the nature, source or movement of the funds.
“Investigations established that the bank accounts operations had suspicious activities where funds could be received from specific foreign entities which raised suspicion. The funds were then transferred to related accounts as opposed to settlement to merchants,” said the Agency.
In an affidavit, Isaac Nakitare, an investigator with the agency says they obtained orders on April 4 this year to search and inspect the accounts.
Nakitare says by the time he obtained the orders, the accounts at Guaranty Trust bank belonging to Flutterwave had a balance of Sh5.3 billion, Sh1.4 billion at Equity bank and other millions at Ecobank.
Some of the funds he said were transferred into fixed deposit accounts.
The Agency further established that Flutterwave was concealing the nature of its business by allegedly providing a payment service platform without authorization from the central bank of Kenya as required by section 12 of the national payment system act.
The accounts he said were used as conduits for money laundering in the guise of providing merchant services.
“If indeed the Flutterwave was providing merchant services, there was no evidence of retail transactions from customers paying for goods and services. Further, there is no evidence of settlements to the alleged merchants,” he said.
The company’s Equity account number revealed that at some point in May 2021, it received 185 online card payments all sharing the same bank identification number.
The transactions were done using cards issued by the same bank at the same point on the same day raising suspicion of card fraud.
For instance, ARA says the Flutterwave equity USD Bank account was opened in November 2020.
The funds received were mainly from Flutterwave Inc.
Between 2020 and 2022, the account received approximately Sh12 billion and the funds were either transferred to Remix ltd while the rest were invested in a fixed deposit account.
Justice Maina further issued orders stopping Boxtrip travels and tours limited from transferring or withdrawing 3.9 million dollars (Sh460 million) held in his Eco bank account
The Director of Boxtrip travels and tours the director is listed as Enyioma Olufemi a Nigerian national.
“It received the money from Flutterwave ltd in two days. That is 27 to 28 April this year.”
“No explanation nor supporting documents were provided to justify the transactions therefore reasonable grounds to believe that the accounts were used as conduits for money laundering,” said ARA.
For Bagtrip travels, the court froze its account holding Sh425 million shillings.
The director of the company is listed as Taiwo Soyemi, a Nigerian National.
It received the monies from Flutterwave ltd and rainbow solution technology on 28 April and 6 May 2022.
A further Sh1.2 million belonging to Elivalat Fintech Limited was frozen.
Some of the monies were transferred to Tiware Adrian Simon who is one of the directors at Elivalat ltd and to Muoko David who is one of the directors of Flutterwave ltd.
For Aduru technology limited, the court froze Sh100 million held in its Equity account.
The directors of the company are listed as Adaeze Okonkwo, and Caroline Muchina, wife to David Muoko who is a director of Flutterwave.
For Hupesi solutions, the court preserved the Sh1.6 million held in its Equity account.
The proprietor of the company is listed as Festus Mutuku.
The documents indicate that the company’s equity account received a total of Sh143m of which 54 million was transferred to Flutterwave payments, 45 million transferred to GC Natural PL and internal transfers of Sh26 million.
The transactions were done in tranches of below Sh1 million to avoid reporting threshold.
But by the time the agency obtained orders to freeze, only 1.6 million was left in the account.
The court preserved another Sh2.4 million held in the account of Crus ride, a motor vehicle dealer.
The company is said to have received the monies from Flutterwave on June 6. The funds were later transferred to Simon Ngige.
“The account had been dormant and had not received any funds from September 2021 to May 2022. However, in June 2022, the account received 269,000 US dollars (31.7 million shillings),” said ARA.
The documents indicate that Ngige received 452000 US dollars (Sh53.3 million) in his KCB account from Flutterwave, Cavin solutions and Cruz ride auto.
On 24 June, Ngige transferred 200,000 US dollars (SHS 23.6 million) to his KCB account. The court stopped him from transferring Sh14 million left in his account
“An analysis of the statements of accounts established that the accounts received suspicious deposits that indicate smurfing activities hoping to evade detection,” said ARA.
The orders granted by the court will be in force for a period of 90 days.
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
