Following investigation into fraud and money laundering allegations leveled against Nigerian fintech giant, Flutterwave and its counterpart, Chipper Cash, the Central Bank of Kenya (CBK) has ordered all financial institutions in the East African country to stop doing business with the fintechs.
The order follows the announcement on Thursday by CBK governor Patrick Njoroge that both Flutterwave and Chipper Cash are not licensed to operate in Kenya.
“Flutterwave is not licensed to operate as a remittance provider or for that matter as a PSB service provider in Kenya. They are not licensed to operate and therefore they shouldn’t be operating. We can also say the same for Chipper Cash,” he said.
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The CBK’s bank supervision deputy director, Matu Mugo, directed all regulated banks, microfinance and mortgage finance institutions to cut all their relationship with the two startups with immediate effect.
“It has come to the attention of the Central Bank of Kenya (CBK) that Flutterwave Payments Technology Limited and Chipper Technologies Kenya (Chipper) have been engaging in money remittance and payments services without licensing and authorization by CBK…You are therefore directed to immediately cease and desist from dealing with Flutterwave and Chipper,” said Mugo in the letter.
Early this month, a Kenyan court had ordered the freezing of the companies’ accounts for money laundering. The court said that both Flutterwave and Chipper Cash were among over 50 companies carrying out illegal activities in Kenya.
Following investigation, Kenya’s Asset Recovery Agency (ARA), told the court that the accounts of seven targeted companies were used as conduits for money laundering in the guise of providing merchant services. The agency said it began investigations after suspicious activities and transactions in the seven companies were flagged on suspicion that they were proceeds of crime. It also said that the fintechs was illegally operating in Kenya, because it has no valid license from the CBK.
The development is a huge blow to the two startups that are occupying prominent positions in African fintech market. Flutterwave is the most valuable African fintech at $3 billion valuation while Chipper Cash is believed to have attained the unicorn status.
It is also seen as a potential setback for the African tech market that has been riding on huge investment funds from investors across the globe. African startups raised $1.2 billion in Q2 2022, indicating a 15% drop from the total funding raised in Q1.
However, Flutterwave and Chipper Cash’s lack of license has been attributed to Kenya’s irregular license schedule. Flutterwave started operation in Kenya in 2016, while Chipper Cash was launched in the country in 2018.