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M-pesa Has Been Huge for Kenya’s Economy — and for Scammers

Nearly half of the country that uses the ubiquitous mobile money service has fallen victim to fraud.

In January 2022, Peter Mwanzo, a senior Nairobi police officer, became a high-profile victim of mobile money fraud. Scammers replaced his SIM card remotely, transferred 597,100 Kenyan shillings ($4,575) from his mobile banking wallets, and took out hefty loans in his name — all while he had his phone on him.

“I could not explain how it happened as I have never shared my PIN or personal details with anyone. This is madness. It seemed easy for the third party to use my SIM card,” Mwanzo told the Kenyan high court months later while testifying against the suspected fraudster, according to local reports.

In court, Mwanzo also pointed a finger at Safaricom, his cellphone provider. He said he couldn’t understand how his SIM card had been so easily replaced and his accounts accessed remotely. “Safaricom ought to take responsibility. There are many complaints of SIM swap,” Mwanzo said.

In 2007, Safaricom, Kenya’s largest telecommunications company, collaborated with Vodafone to launch M-Pesa. The mobile money transfer service allowed users to send and receive money using only a SIM card and a phone that didn’t need to be connected to the internet. Today, over 30 million people in the country use M-Pesa regularly. The service represents Safaricom’s largest revenue stream, bringing in 107.69 billion Kenyan shillings ($818 million) in 2022 — 36% of the company’s total revenue. According to data from the Central Bank of Kenya (CBK), mobile money transactions account for over half of Kenya’s $110 billion GDP, and M-Pesa controls 99% of the market.

M-Pesa’s ubiquity has attracted many scammers. In 2021, a FinAccess survey found that nearly half of the Kenyans using mobile money had fallen victim to fraud or accidentally transferred money to the wrong recipients. That figure was 8.4% higher than the previous year. In 2022, a CBK report showed that 6.1% of mobile banking users and 25.9% of mobile money users had lost money through cybercrime.

In February 2023, Kenya’s Directorate of Criminal Investigations (DCI) arrested eight men alleged to be members of a criminal syndicate that had defrauded mobile money users of more than 500 million Kenyan shillings ($3.8 million). Some towns, such as Mulot in Bomet County, have emerged as operating hubs for the M-Pesa SIM-swap fraud syndicates.

Source : Rest of World