Issue 13 - Mobile Money Adoption on the Rise in Africa: Taking a Closer Look at the Fraud Risks

Mobile money has transformed the financial industry across Africa, revolutionising access to financial services since its early days with M-Pesa in Kenya. This widespread adoption, accelerated further by the pandemic, has unlocked unprecedented levels of financial inclusion, allowing over 469 million people in sub-Saharan Africa to access banking services as of 2020. However, as mobile money becomes a mainstream financial service, it has also attracted a wave of cyber threats and fraudulent schemes that undermine its promise of secure, accessible financial services.

The Bright Side: Mobile Money as a Driver of Financial Inclusion

The impact of mobile money on financial inclusion in Africa cannot be overstated. From bill payments to seamless transfers, mobile money has enabled millions to participate in the economy securely and conveniently. In 2022, the number of mobile money accounts grew by 13%, with daily transaction values surpassing $1.45 billion globally, according to the GSMA’s 2023 State of the Industry Report on Mobile Money. For many, mobile money services represent the primary means of handling finances, creating a lifeline for those who previously had no access to banks.

The Dark Side: Mobile Money’s Vulnerability to Fraud

Despite its advantages, the mobile money ecosystem is increasingly vulnerable to fraud. Due to limited digital literacy and a lack of robust data protection measures, 31% of users in sub-Saharan Africa report needing assistance to use their mobile money accounts, a statistic that exposes a knowledge gap easily exploited by cybercriminals. Mobile money fraud has become a complex, multi-faceted issue, affecting users from all backgrounds.

Types of Mobile Money Fraud

1. Identity Theft and SIM Swap Fraud
   Identity theft is among the most common types of fraud targeting mobile money users. In Kenya, for example, fraudsters stole 500 million KES after illegally registering 123,000 mobile SIM cards using stolen identities. By swapping SIM cards and impersonating account holders, these criminals take out loans and transfer funds without users’ knowledge.

2. Social Engineering Scams
   Scammers frequently employ social engineering tactics to gain unauthorised access to accounts. This method is particularly common in countries like Uganda, where fraudsters impersonate familiar contacts or pose as service representatives to gain trust. Social engineering scams often involve misleading calls, phishing texts, and fake promotions that trick users into revealing their account details.

3. Money Laundering and Terrorism Financing
   Criminals also exploit the relatively low-value limits on mobile transactions to launder money in small amounts, making it easier to evade regulatory scrutiny. 

4. Fraudulent Promotions and Fake SIM Swaps
   In countries like Malawi, cybercriminals manipulate users through fake promotions and SIM swaps. The monthly impact of such schemes in Malawi is estimated to reach $117,000, highlighting the need for user education and awareness around fraudulent promotions.

Countermeasures: Strengthening Mobile Money Security

To address these growing threats, mobile money providers, regulators, and governments are working together to implement countermeasures that protect users:

1. Enhanced Identity Verification
Stronger identity verification through biometric solutions such as facial recognition and fingerprint scanning is essential for preventing unauthorised account access. In Nigeria, for instance, the National Identification Number (NIN) has been linked to mobile SIMs, enhancing security and deterring fraud.

2. Consumer Education Programs
Educating users about fraud tactics, such as recognising phishing messages and avoiding fake promotions, can significantly reduce susceptibility to scams.  Mobile money providers can organise regular awareness campaigns to teach users about secure account practices, such as:

• Not sharing PINs or passwords with anyone.

• Ignoring unsolicited calls or messages that request personal information or OTPs.

• Double checking phone numbers and recipient names before making transfers.

3. Implementing SIM Swap Protections

SIM swap scams are a growing threat where fraudsters convince mobile operators to transfer a user’s phone number to a new SIM, allowing access to their mobile money account. Providers should implement multi-layered SIM swap detection protocols, such as confirming the user’s identity through biometrics or requiring additional PINs and verifications before authorising a SIM swap.

Bottomline: Safeguarding the Future of Mobile Money

As mobile money continues to thrive in Africa, ensuring its safety is crucial to preserving trust and promoting financial inclusion. By implementing strong identity verification measures, educating users, and investing in SIM swap protection and advanced fraud detection technologies, Africa can build a mobile money ecosystem that stands resilient against evolving cyber threats. 

Fraud Watch

• NFIU to Collaborate with SEC to Enhance Anti-Money Laundering System

  The chief executive director (CEO) of the Nigerian Financial Intelligence Unit (NFIU) says the agency is committed to collaborating with the Securities and Exchange Commission (SEC) to enhance the effectiveness of its anti-money laundering (AML) and combating the financing of terrorism (CFT) systems. Read more here

• South Africa Records a 32% Increase in Fraud Incidences Over the Past Year

  The 2024 fraud statistics show a 32% increase in the number of fraud incidents reported to the Southern African Fraud Prevention Service in 2023. Those figures also reveal a 62% increase in fraud listings. Read more here.

Trending Stories - Country Coverage

• Crypto and Compliance: Navigating New Regulatory Waters

  In response to recent crypto compliance challenges, the Financial Sector Conduct Authority (FSCA) and other regulators like the Financial Intelligence Centre (FIC) have implemented several measures to ensure that the rapidly evolving world of cryptocurrency operates within a secure and well-regulated framework. Read more here.

• FATF Commends Nigeria’s Efforts at Strengthening Anti-Money Laundering, Counter-Terrorist Financing

  The Financial Action Task Force (FATF), has recognised the progress made by Nigeria towards strengthening her Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) measures. FATF which is the body responsible for setting global standards on AML/ CFT issues, made the commendation on Friday, at the end of its October Plenary Meeting in Paris, France. Read more here.

• Nedbank Fraud Warning for South Africa

  Nedbank has issued a warning to its customers, detailing the lengths criminals will go to get their banking details. In a notice sent to customers on its app, the group said that criminals use several tricks to steal one’s card information. Read more here.

• Nigeria to get off Grey List by May 2025 – CBN

  The Central Bank of Nigeria (CBN) has announced that the apex bank is engaging at the highest level to facilitate Nigeria’s removal from the Financial Action Task Force’s (FATF) “grey list,” an anti-money laundering watchlist by May 2025. Read more here.

Let’s hear from you

Have questions? Hit reply and let's chat about anything fraud or AML compliance-related in Africa.  

Until next time,

The Smile ID Team.