US vs Nigeria vs Binance
also ft; Nigeria's banking fraud problem, Uganda's burgeoning surveillance, and more
CybAfriqué is the space for news and analysis on cyber, data, and information security on the African continent.
Hi guys, Olatunji here. Long time no email. Let’s just say I underestimated how much work this could be, and was blindsided even more by school and work commitments. We’re back now though, and I’m being joined by two people who are as enthusiastic about this work as I am.
We’ll also be changing a few things over the next couple of weeks, starting from a pivot from Substack to another platform (why? We will cross that bridge when we get there), to introducing a podcast, a job & opps section, and an in-depth vertical. Excited!
Today’s issue was written by Adebola Makinde, with research and editing from Olatunji Olaitan and me, Olatunji Olaigbe. The team is talking about Nigeria’s unending KYC and banking identity issue, in tandem with the country’s banking fraud problem. There is no better way to start the newsletter.
HIGHLIGHTS:
Nigeria’s neo banks lose an estimated 6 million customers over KYC issues
On Monday, the Central Bank of Nigeria (CBN) lifted the ban on onboarding customers for four neobanks including OPay, Kuda, Palmpay, and Moniepoint, on account of the rapid flow of crypto transactions in fintechs and commercial banks, although the latter was not affected. This move by the apex bank might have stunted user-base growth in these startups, as a report finds that fintechs could boast an average of 1.1 million users weekly.
The permission to conduct business as usual is however attached with new conditions such as improved Know Your Customer (KYC), applying to not just retail customers but also Nigeria’s extensive network of kiosk-based pos-wielding banking agents by physically verifying their addresses. The exciting thing for fintechs is that they get to reclaim or boost their customer base but they now have to spend more money to have their customers verified.
Prevalent issues of fraud have been blamed on the failure of neobanks to comply with standard KYC procedures. Recently, a 40 billion naira fraud in one of the country’s legacy banks, First Bank, by its staff was diverted to 98 different accounts suspected to be up to the second beneficiaries. Flutterwave, Nigeria’s fintech Unicorn, is also in court to recover an estimated 11 billion naira lost to a security breach in April 2024.
Compared to 2022, the FITC data on Fraud and Forgeries in the Nigerian Banking industries exposes an increase in staff-related cases by 42.11% in Q4 2023. In Q4 2022, only 38 insider involvement cases were found, unlike 54 cases in Q4 2023. Meanwhile, outsider involvement dropped significantly by 22.97% from 13,436 to 10,350, as well as the volume of transactions involved.
Yet, banks are lenient in trying to oust fintechs in the game and calling the kettle black while they seem exposed to the same problem. Ganiu Oloruntade of TechCabal writes that banks and neobanks need to work together as an industry and embrace open banking models, but the competition between digital and traditional banks remains much of a gap.
The US versus Nigeria versus Binance
When Tigran Gambaryan, head of Financial Compliance at Binance was arrested with Nadeem Anjarwalla his colleague, in Nigeria in February, he was charged — on behalf of his company, the world's largest cryptocurrency exchange platform — with tax evasion and money laundering according to the Economic and Financial Crimes Commission (EFCC). While his partner, Anjarwalla, a British-Kenyan absconded from the Abuja custody in March, Gambaryan, an American citizen, has represented the company for over three months in Kuje prison.
On June 4, a letter signed by 16 US politicians was addressed to the US President, Joe Biden, Secretary of State, Antony Blinken, and Special Presidential Envoy for Hostage Affairs, Roger D. Carstens over concerns about Gambaryan's health to secure his release. In the latest appeal, over 100 US former prosecutors addressed Blinken directly highlighting previous concerns and improper conditions by which the Binance executive is being reprimanded as collateral. They noted that he is a Mid-tier staff and cannot represent the company. Support for Gambraryan is not disconnected from his extensive work in fighting crime and money laundering through crypto as many members of the security community, including WIRED journalist Andy Greenberg, have openly advocated for his release.
Cryptocurrency platforms are increasingly being detected as a passage for scammers to launder money contributing to aggravating security challenges globally. Even though cryptocurrency platforms are cryptic and their decentralized nature makes it hard to be hacked, several platforms have been susceptible to scams including Binance. Nigeria is saying that Binance as a platform has been used to launder money and undermine the country’s economy. Officials have tagged crypto as an issue of “national security.”
The founder and ex-CEO of Binance, Changpeng Zhao, recently served a four-month sentence in the US after he pled guilty to money laundering despite clamors for a three-year term. Binance's legal troubles in Nigeria and the US can be traced to operational issues, including regulation and compliance, amongst others, and government skepticism. Born in China, Zhao has since claimed Canadian citizenship, hence, serving in a US prison did not raise eyebrows.
Gambaryan was denied bail and awaits a ruling till the next hearing scheduled for June 20.
In a statement, Nigeria's Minister of Information and National Orientation, Mohammed Idris, emphasized that Binance's schemes are “part of a broader international pattern.” “It will be for the courts here, as in other jurisdictions, to hold the company and its executives accountable,” he added.
FEATURES
In Uganda, authorities are bullish on citizen’s data as a surveillance tool, reports Oliver Solon for Bloomberg. “The East African country’s identity card system has become integral to banking, voting — and targeting critics.”
Algeria's Hacker and Hero. Follow Hamza Bendelladj’s story as he faces sentencing after allegedly stealing from US banks and giving to Palestinian charities.
HEADLINES
Chinese nationals plead guilty to running Zambia scam operation – The Record
Nigeria’s cybercrime reforms leave journalists at risk – Al Jazeera
Nigerian fintech startups could spend over $1 million on new KYC address verification – TechCabal
Hacktivist Group R00TK1T ISC Claims Breach of Egyptian Ministry’s Systems – The Cyber Express
South African Government Pension Data Leak Fears Spark Probe – Dark Reading
Kenya Detected 1.2bn Cyber Threats in Q4 2023 – The Kenyan Wall Street
Mauritius, a cybersecurity workshop to protect African cyberspace – Africa Cybersecurity Magazine
Information Regulator warns of hefty fines for data breaches – SABC NEWS
EU opens data pact talks with Kenya, in first for Africa – EUobserver
Cybercrime in Benin: A false profile of a rich and lesbian woman unmasked in Porto-Novo – Africa Cybersecurity Magazine
ACROSS THE WORLD
Spying, hacking and intimidation: Israel’s nine-year ‘war’ on the ICC exposed – The Guardian UK
Data breach exposes details of 25,000 current and former BBC employees – The Guardian UK
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