December 1, 2015 6:17 PM UTC

Telecom/BitPesa Legal Tangle Over AML Threatens Mobile Payments In Kenya

As mobile payments and cryptocurrency have made strides providing an alternative to traditional banking in Kenya, legal conflicts have emerged among mobile currency providers and Safaricom, the nation’s dominant telecom service. Kenyan legal authorities may need to clarify how anti-money laundering/know your customer (AML/KYC) and other regulations will be enforced and who will enforce them.


BitPesa, a bitcoin payments and remittance service which uses the Safaricom telecom, and Lipisha, the payment gateway for both BitPesa and M-Pesa, are suing Safaricom in Kenya, according to International Business Times. Safaricom stopped Lipisha from processing M-Pesa transactions and later reinstated it as long as it terminated its relationship with BitPesa, which is Africa’s largest bitcoin trading platform.

Lipisha and BitPesa claim Safaricom has no right to require this.

AML Rules Raise Questions

Safaricom claims BitPesa does not meet AML requirements, which the latter denies.

The Kenyan high court is scheduled to make a preliminary decision Dec. 14. It is unknown at present how AML rules will be enforced, or who will enforce them. The transactions among the platforms are currently suspended.

Under Lipisha, BitPesa converted its customers’ bitcoins to Kenya shillings which it sent to recipients’ M-Pesa. Safaricom, Vodafone and Vodacom launched M-Pesa in 2007.

BitPesa told International Business Times that it has implemented AML/KYC policies that comply with Kenyan requirements. BitPesa said the Central Bank of Kenya (CBK) has said it (BitPesa) falls outside of its (CBK’s) money transmission and remittance regulations. Hence, Safaricom cannot require BitPesa to produce a CBK license when the bank regards it as inapplicable.

M-Pesa, the most successful mobile-based financial service in the developing world, dominates Kenya’s market with more than 90,000 agents and close to 20 million accounts in Kenya.

Safaricom Had To Open Its Network

In 2014, Safaricom was required to open its network to other mobile money services. The ruling allowed users of telecoms Airtel, Orange and yuMobile to deposit and withdraw cash at M-Pesa agent shops.

The CBK, the Communications Authority of Kenya and the Competition Authority of Kenya work together on such situations, International Business Times noted.

Stephane Gourevitch, CEO of Mobile Convergence Ecosystems, said it is likely the three authorities will investigate M-Pesa over pricing and transparency and USSB channel access.

Safaricom could not be reached for comment.

Claire Alexandre, Vodafone’s head of commercial and strategy and mobile payments, said cryptocurrency will play a bigger role and that regulators need to develop a framework for it.

Alexandre said the main hurdle for people in countries that M-Pesa serves is to have a choice besides cash. She said there is a need to bridge cash and digital money.

Another issue is having a telecom act as a credit provider, which typically requires acting as a bank. The CBK wanted to ensure that e-money was backed by the equivalent in cash and held in a segregated account.

Also read: ’60 Minutes’ highlights how mobile payment service M-Pesa has changed life in Kenya

Telecom Vet Questions Bitcoin’s Role

George Reeve, the telecom Millicom’s general manager and COO for mobile financial services who previously ran M-Pesa, said because people in places like Kenya can do financial transactions with phones does not signify an intuitive use case for bitcoin. He said a service like Millicom has to operate in a regulatory environment including AML/KYC and he isn’t sure cryptocurrencies are “aligned with those sorts of regulatory frameworks.”

Gourevitch added that the regulatory concerns are real, but the events concerning Safaricom and M-Pesa can also be seen as attempts to stymie competition through regulation.

Featured image of native Masai man, Kenya from Shutterstock.

Lester Coleman

Lester Coleman is a media relations consultant for the payments and automated retailing industries.

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