Fuliza heist raises mobile money integrity concerns

The number of financial fraudsters prowling Kenya’s financial sector has raised questions on the integrity, digital safety levels and the economic impact of the vice on the economy, if not contained.

Early this week, it emerged that fraudsters breached Fuliza’s firewall and allegedly withdrew a whooping Sh500 million in an operation that has painted the country’s e-commerce space as a sitting duck.

Fuliza, an overdraft mobile money product jointly operated by leading telco Safaricom, and lenders NCBA and KCB Group, opened a can of worms.

This is one of the many digital lending platforms used by an estimated 15 million Kenyans to access unsecured credit to meet their short term cash flow shortfalls. Since inception, the M-Pesa platform has been the cornerstone of Kenya’s finacial sector revolution, with Central bank of Kenya (CBK) data indicating that last year, e-commerce accounted for 56.8 per cent of the country’s $264 billion (Sh33 trillion) Gross Domestic Product (GDP) with mobile phone transactions worth $20.3 billion (Sh7.9 trillion) realised.

Artificial intelligence

In the review period, agent transactions also grew by 1.1 trillion from the Sh6.8 trillion recorded in 2021, underlying the central role mobile money was playing in the growth of the Kenyan economy. Experts now say that there is need to invest in artificial intelligence to help to monitor and raise firewalls that may help the platforms raise red flags.

Geoffrey Shimanyula, an IT expert and director at EKEKO East Africa Limited told Business Hub the Sh500 million online heist exposed Safaricom’s M-Pesa infrastructure and urged the telco to invest in not only Artificial Intelligence (AI) but also geo-location in order to mitigate future occurrence of financial fraud.

“These are not hackers. They have taken advantage of loopholes in the system using AI to know how much they were worth, and were probably carrying out the fraud in a laboratory somewhere” Shimanyula said.

He said the suspects were able to beat the M-PESA system by setting a target, then bought multiple sim cards that they used to get the loans and discard. Shimanyula said while being built,Shimanyula, Safaricom would also do with a geo-location system to assist them monitor.

Samson Nyandemo, a senior lecturer at the University of Nairobi (UON), said failure to secure digital financial infrastructures can “lead to financial fraud and then affect the process of financial deepening.”

The manipulation of the infrastructure may even cast doubts on the security of other online transactions amid the roll-out of a digital revolution that will enable Kenyans earn through digital space through the Hustler fund. To date, the fund has attracted 18 million subscribers.

The Communication Authority attempted to cap sim card ownership in 2016 by limiting individual subscribers to a maximum of 10 active sim cards, as part of a drive to curb mobile phone crimes, including financial fraud, a move yet to be agreed by operators.