FINTECH FRAUD

Safaricom’s Fuliza Loan Service Lost USD 4 M In An Elaborate Scam

By  |  February 9, 2023

Kenya’s leading telco, Safaricom, had its hugely popular overdraft service, Fuliza, exploited by scammers who fleeced it for close to KES 500 M (~USD 4 M), the Directorate of Criminal Investigations (DCI) alleges.

DCI detectives say they have uncovered a high-level fraud syndicate where scammers have obtained millions of shillings through Safaricom’s Fuliza service which allows Safaricom’s M-Pesa customers to complete their M-Pesa transactions even when they do not have enough funds in their M-Pesa account. The M-Pesa mobile money service is the predominant digital payments channel in Kenya and Fuliza is the leading micro-loan service offered on the M-Pesa mobile money platform; so much of a hit with the Kenyan population that an average of USD 13.32 M was disbursed out daily in the first half of 2022 through Fuliza.

In a statement revealing details, Kenya’s DCI said Safaricom’s Fuliza product was exploited in a well-coordinated scheme by eight young men based in Nakuru and Trans-Nzoia counties. Isaack Kipkemoi, Gideon Rono, Maxwell Ributhu, Gideon Kirui, Moses Rono, Collins Kipyegon and Edwin Cheruiyot were arrested at an apartment in Kiamunyi, while the alleged mastermind Peter Gitahi was arrested in Kitale, Trans-Nzoia County following the operation by DCI officers.

The young men who are said to have been found in possession of thousands of Safaricom and Airtel SIM cards were allegedly using fraudulently generated identity card numbers to register the SIM cards before proceeding to borrow money through the application.

The DCI statement says detectives began investigations into this well-choreographed fraud after a report was filed with 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 defaulting on repayment.

According to sleuths from BFIU, over 123,000 new mobile phone numbers opted into 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 proved futile. It is after further investigations that detectives realized that the SIM cards had been registered fraudulently 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.

Preliminary investigations indicate that after developing the numbers and registering the lines he would sell them to his accomplices based in Nakuru who would then perpetuate the fraud. Further, the detectives uncovered that some of the lines had been registered as Safaricom agents where the borrowed funds would be deposited to personal bank accounts belonging to the individuals, disguised as M-Pesa float.

The statement adds that the suspects would initially borrow money and repay thereby improving their credit scores, until the SIM cards achieved their limits when they would borrow for the last time before disposing of the SIM card.  One identity card would, according to the DCI, be used to register 5 lines in the daring SIM scam perpetrated by the suspects, aged between 24-30 years.

The suspects who before the bust are said to have been living large in an apartment at Kiamunyi, have through their craft acquired 2 brand new Subarus, one Toyota Mark X, a Toyota Probox and two motorbikes for their ease of movement allegedly.

During the operation, the detectives are said to have recovered 14 Mobicom phones used in registering M-Pesa user SIM cards, 6 laptops, over 40 mobile phones, 7 routers, assorted Safaricom lines, over 1000 Safaricom subscribers registration forms, over 200 ATM cards from all major banks, and car agreements among other exhibits.

It is understood that detectives are currently interrogating the suspects for more insights into the high-level fraud before arraigning them in court. 

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