A recent report published by ‘businessdailyafrica’, has posited that fintech companies may be failing to take regulatory compliance seriously.
The report which warned that this can pose challenges to such firms if not addressed also identified the inability of some firms to invest in professionals who would guide them on regulatory compliance and protection.”
The report, referring to the recent crisis which affected some African tech firms in Kenya faulted the inability of one of the companies, ‘Flutterwave’ to structure a compliance department, stating that “If Flutterwave, for example, had secured an operating license, it would have invested in a protection and compliance department to advise it to strictly comply with all financial regulations required.”
“Without going into the merits of the court case, the dispute exposes a major compliance problem fintech start-ups may be struggling with and maybe getting away with it because they are a start-up after all.
“Unfortunately, it stands to catch up with them later down the line.
“Fintechs are largely underregulated in many jurisdictions and Kenya, many payment service providers operated freely without acquiring a license from the CBK until 2021 when most of them regularised their operations.
“This was still an oversight on their part because there was no lacuna in the law. The National Payment Act 2011 brings all payment service providers under the direct oversight of the CBK, and therefore they have to seek a license from the regulator.
“Court filings state that Flutterwave failed to explain or even provide supporting documents to the many suspicious transactions it was making.
“For a payment service provider that is valued at around Sh300 billion, it is beyond risky to be operating without a license and security checks on customer verification and transactions support.” the report read.