Africa’s evolving mobile money services need better security

by Jan 16, 2023Insights

Africa has one of the most widely-established mobile money industries in the world. In some countries, it is more popular than traditional financial services due to its ease of accessibility over mobile networks and the widespread network of vendors and merchants. Security becomes a major concern when millions of people use these mobile money services for business and daily living.

There is still a need for mobile money operators to improve security services, especially in terms of anti-money laundering (AML) and customer verification, also called ‘know your customer’ (KYC). These service providers must ensure that they comply with local and international regulations to minimise cyber crimes.

4C Group of Companies provides enterprise-grade software solutions to mobile network operators and financial service providers in Africa. These include various fintech services and cyber security offerings. Mobile money operators and financial service providers need to consider automated solutions to protect their businesses and their customers against various threats.

Vector illustration of a man and woman standing next to giant smartphones with gold coins transferring between the two.

Current challenges with KYC and security

There are hundreds of mobile money operators in Africa and nearly half of all registered mobile money wallets in the world can be found on the continent. The continent accounts for almost 70% of mobile money transactions worldwide as it’s such a convenient and attractive alternative to traditional banks. Almost anyone with a mobile phone can register a wallet and start transacting without needing physical cash or a bank card.

What’s more, the industry is still growing rapidly as mobile networks expand their connectivity into remote regions of the continent. This massive potential for expansion, coupled with a growing population across the continent, means that mobile money is set to become even more popular. This necessitates better security solutions.

Currently, there is a lack of KYC and robust identity checks used to verify customers in many countries. This makes the mobile money system vulnerable to criminal infiltration, including money laundering schemes, fraud, extortion and terrorist organisation financing. Weak KYC solutions mean that criminals can easily sign up for a wallet and start using the service.

Many mobile money operators will perform background checks or scour international watchlists for criminals trying to register for an account. However, the regulatory frameworks in many countries do not make this a necessary requirement, so some providers have a more relaxed approach to KYC and customer verification.

Most countries do have clearly-defined laws in place for KYC and AML reporting, but on the whole, there are still improvements to be made across the continent. When a new customer opens a mobile money account, they usually provide an identification number and link their account to a phone number on the network. Some countries require additional identification details, such as proof of address, but many do not (as part of the minimum KYC regulations).

ID documents are the foundation of the KYC identification process, but this is not a foolproof security measure. Some African countries have a lower national ID registration rate and the prevalence of illegal (fake) IDs is a concern. 

In addition, a broad spectrum of ID documents is accepted, ranging from ID cards and passports to driver’s licences and tax certificates. This introduces certain vulnerabilities in the KYC system through illegal documents and fake IDs.

cartoon image of a phone that is being protected by a security officer

Expert security providers are needed

Mobile money operators and telcos need to work with expert security providers that can offer automated software solutions to improve security standards and compliance. This will help to minimise the current fragmented state of compliance and ensure that proper security checks are performed. This also requires governments to implement better frameworks for security and standards.

This will help with cross-border compliance and international mobile money transfers, which are often used to relocate illegal earnings from one country to another before being cashed out. Cross-border compliance becomes an issue where regulations differ from one country to the next. 

However, a security service provider with an international reach, such as 4C Group, could offer better AML and KYC services. Automated software and watchlist scanning will ensure that known criminals are identified and blocked from using the mobile money service. Our services include automatic reporting and custom alerting for potential threats, such as money laundering or known individuals on watchlists.

Regulatory frameworks are often updated or changed in the countries in which we operate. We have the ability to adapt, alter and update your security solutions in line with these new laws to ensure that you are always compliant. For more information about our AML services and fintech solutions, please contact us today.

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At 4C Group of Companies, we strive to effect operational changes and cost savings for customers through our iNSight product and associated services. This product’s main function is to re-purpose and deliver business-critical information to a variety of systems and stakeholders. 

We specialise in information assurance, business assurance, fintech solutions and a variety of business systems. For more insights into our products and services, check out our blog page or follow us on Facebook, LinkedIn and Twitter.

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