Inside the card fraud that claimed $4M from Safaricom

Safaricom lost over $4 million following a card fraud operation that was carried out on its lending platform, Fuliza loans by eight suspects in 2022, this is according to Kenya's Directorate of Criminal Investigations (DCI).

These suspects used fraudulently generated SIM card numbers to apply for loans on the platform. "Detectives began investigations into this well-choreographed fraud after a report was filled to the Banking Fraud Investigations Unit (BFIU) in August 2022, after the managers of the fund detected an unusual spike in Fuliza loan uptakes that were way above their performance scale and the borrowers were not repaying the loans," the directorate said in a statement on Wednesday (Feb. 8, 2023).

According to reports by the BFIU, over 123,000 new mobile phone numbers opted into Safaricom's Fuliza and took up loans in January 2022. Thereafter, the SIM cards were either fraudulently vacated or switched off and efforts to reach the customers turned futile.

However, after further investigations, the DCI realized that the SIM cards had been registered by one of the suspects identified as Peter Gitahi, who is suspected to have access to the National Registration Bureau database, where he develops falsified identity numbers used in the high profile fraud.

Following a "meticulous operation" by the DCI, Gitahi and his cohorts—Isaack Kipkemoi, Gideon Rono, Maxwell Ributhu, Gideon Kirui, Moses Rono, Collins Kipyegon and Edwin Cheruiyot were arrested at an apartment in Kiamunyi and Kitale, Trans-Nzoia County this week.

During the operation, the detectives recovered 14 mobicom phones used in registering MPESA user SIM cards, six laptops over 40 mobile phones, seven routers, assorted Safaricom lines, over 1000 Safaricom subscribers registration forms, more than 200 ATM cards from all major banks, car agreements among other exhibits.

Introduced in 2019, Fuliza is an overdraft mobile money overdraft product jointly operated by Safaricom and two of Kenya's largest banks, NCBA and Kenya Commercial Bank Limited (KCB). It is embedded within MPESA with an opt-in, with limits determined by a credit score. It also has a near-perfect repayment rate because funds are automatically deducted once the customer receives money via MPESA.

Fuliza is used by more than 18% of Kenyans, according to the Central Bank of Kenya. Recently, Safaricom, and its partner banks announced cuts on daily charges for Fuliza loans below Sh1000 ($8.29). A report by Kenyan Wall Street states that Kenyans borrowed an average of Sh1.6 billion ($13.2 million) daily from Fuliza, in the first six months of 2022.

In the first six months of 2021 alone, Safaricom earned Sh2.8 billion ($23 million) in revenue from Fuliza borrowings. Fuliza loans now make up 85.54% of digital loans given out by NCBA, Kenya's third-biggest bank by assets.