FinTech: Fintechs In Kenya And India Under Regulatory Glare For Alleged Money Laundering

July 7, 2022 | FinTech, News
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Funds belonging to fintechs have been frozen by a court in Kenya; India’s Enforcement Directorate has seized accounts

Alleged money laundering by fintechs has drawn regulatory wrath in unconnected matters in Kenya and India. A court in Kenya has frozen more than $40 million in accounts belonging to Africa-focused fintech payments giant Flutterwave under the country’s anti-money laundering laws. In India, the country’s Enforcement Directorate attached 86.6 crore rupees (about $11 million) from various fintechs and non-banking finance companies (NBFCs) under the criminal sections of the Prevention of Money Laundering Act (PMLA).

Kenya

Flutterwave, headquartered in San Francisco, is a payments giant operating in Kenya, Africa.

Kenya’s Assets Recovery Agency moved the High Court for authorization to freeze several bank accounts owned by Flutterwave Payment Technology Ltd. under the country’s anti-money laundering laws.

The court order has suspended all dealings in the frozen bank accounts. “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 at a later date.

Though Flutterwave acknowledged its ownership of the payments firm subjected to the bank freeze, it said that claims of financial impropriety in Kenya were “entirely false”. It also reiterated that its operations were regularly audited and compliant with regulations.

India

India’s Enforcement Directorate (ED) has alleged that a number of fintech companies and NBFCs “backed by” Chinese funds have generated proceeds of crime worth more than Rs 940 crore (about $119 million) by indulging in predatory lending activities and violating RBI guidelines while operating in India.

“ED has been conducting money laundering investigation against a number of NBFC companies which are in the business of instant personal micro loans. It was found that various fintech (financial technology) companies backed by Chinese funds have made agreements with these NBFC companies for providing instant personal loans of term ranging from 7-30 days,” the agency said in a statement.

The ED also charged that fintechs entered into MoUs with defunct NBFCs for utilizing the latter’s lending licences.

“Since, the fintech companies were unlikely to get a fresh NBFC license from the RBI, they devised the MoU route with defunct NBFCs as a via media to do large-scale lending activities.”

The Enforcement Directorate (ED), therefore, recently attached Rs 86.65 crore worth funds lying in a total of 155 bank and payment gateway accounts of NBFCs and the linked fintech companies.

Related Story: Visa and African Mobile Payment Processor M-Pesa Launch Virtual Payment Card

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