Mobile money in Africa: Access, regulations and risks

  • Rodwyn Peterson, senior associate, DLA Piper Africa, Zambia (Chibesakunda & Co)

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The union between the mobile phone, fast internet connections and Africa’s unbanked has seen a boom in mobile banking and mobile money services across the continent. This has helped make the financial services industry more efficient and inclusive. Millions of people now use their mobile phones to do their banking and their numbers are growing daily. Kenya and South Africa have M-Pesa, and Zambia has MTN-Money, Airtel Money and Zamtel Money. In Nigeria, the door for mobile money operators was opened in 2018, and already MTN has announced its intention to provide a mobile money service.

However, the countries where mobile money payments are rising steeply also happen to be hubs for corrupt practices and transnational crime syndicates.  They also are reported to have weak law enforcement against financial crime.

The mobile money system generally sits outside a country’s financial reporting system, making it almost impossible for authorities to monitor mobile money transactions. In Kenya, this has seen M-Pesa used to launder money, to bribe corrupt police officers, and as a payment vehicle in kidnapping and extortion.

This article will show how mobile money in Africa has opened access to the previously unbanked, and look at the role that regulators are playing to mitigate the money laundering risks associated with mobile money.

Mobile money regulations

The success of mobile money lies in the fact that it leverages the ubiquity of mobile phones and the extensive coverage of mobile operators. Often considered a disruptive business model in the style of startups in the sharing economy, mobile money in fact equally disrupts and complements traditional banking services. Most mobile money operators allow users to deposit money into an account stored on their cell phones, to send balances using PIN-secured SMS text messages to other users, including sellers of goods and services, and to redeem deposits for regular money. Users are charged a small fee for sending and withdrawing money using the service. Mobile money services have the opportunity to deepen financial inclusion in developing economies through low transaction costs, increased access in rural/low-income areas, and ease of use.

According to the GSM Association, the body that represents the interests of mobile operators worldwide, mobile money providers face challenges in launching and scaling the full breadth of mobile financial services in countries with non-enabling regulatory environments. The GSMA also says that enabling regulatory frameworks accelerate the development of the mobile money sector, and countries with regulatory frameworks that are not aimed at the mobile money sector show a smaller number of registered and active mobile money accounts, as well as lower agent activity rates than countries with enabling regulation.

In most countries, including Zambia, South Africa and Nigeria, mobile money operators are required to hold a license from the banking regulator to operate a mobile money service, placing them under the supervision of the regulator. In Zambia, for example, the Bank of Zambia first adopted a watch-and-learn approach, but recently introduced the National Payment Systems Directives on Electronic Money Issuance 2015, which covers licensing procedures, minimum capital, use of agents, consumer protection, and KYC requirements. Under the Directives, mobile money operators effectively become a reporting entity for the purposes of anti-money laundering and financial intelligence legislation (for example, the Anti-Money Laundering Act).

Money laundering risks

There are three stages involved in money laundering: placement, layering and integration. Placement involves the movement of cash from its source to a form that is less suspicious to law enforcement. This is followed by the proceeds being placed into circulation through financial institutions and other businesses. Layering involves making it more difficult to detect and uncover money laundering activity, for example by converting the cash into a financial instrument. Integration is the movement of previously laundered money into the economy mainly through the banking system. Often, laundered money goes through a process known as smurfing, where large sums of money are split into smaller amounts that are required for reporting purposes and transactions made up of the smaller amounts are carried out, for example via mobile money transfers.

Several money laundering risk factors exist in the mobile money space, including the absence of credit risk, speed of transactions and (often) the non-face-to-face nature of the business relationship.

However, perhaps because of the ease of use and the uptake of mobile phones in Africa, mobile money systems can be designed to strengthen financial integrity by using controls to mitigate the risk of money laundering.

For example, anonymity is a unique feature of mobile phones and a clear a risk factor. But it can be mitigated by implementing robust identification and verification procedures. In fact, most countries’ KYC legislative requirements already demand that mobile operators take copies of identity documents on mobile service accounts. In doing so, these operators increase transparency and generate useful data on transactions and customers that can be shared with enforcement agencies.

In Zambia, for example, the Zambia Information and Communications Authority issued Statutory Instrument No. 65 of 2011 relating to the Registration of Electronic Communication Apparatus Regulations, which requires the registration of all SIM cards and that any SIM card registration requires an original and valid identity card. In jurisdictions where customer data cannot be reliably verified, it may be appropriate to apply alternative risk-mitigation measures, for example by imposing low value limits in order to qualify as a low-risk product and be allowed to apply simplified identity measures.


Regulators across Africa continue to show a willingness to open the playing field to mobile money operators. In so doing they create a healthy enabling regulatory environment that spurs on the reach of mobile money across the continent, bringing more people into the world of the banked. And with the continuing growth and development of mobile money, regulators and operators must continually evolve in their approach to risk mitigation and anti-money laundering compliance in this sector.

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