Smile ID is thrilled to announce the release of the 2025 Digital Identity Fraud in Africa Report, a deep dive into the latest trends, insights, and actionable strategies to safeguard your business against the growing threat of identity fraud. This comprehensive analysis is the most detailed fraud report focused on the African market and is based on Smile ID’s data from over 110 million verifications conducted in 2024.

Download the Report

What to Expect?

As predicted by Smile ID in the last report, AI-driven fraud is now a pressing concern across Africa. Fraudsters have rapidly adopted AI tools—once free and low-cost—to manipulate biometric data, leading to a sevenfold increase in deepfake incidents from Q2 to Q4 of 2024. This surge signals an alarming shift in the fraud landscape, where traditional defences are struggling to keep pace with highly sophisticated and easily accessible generative AI techniques.

Additionally, the report doesn’t just reflect on the past year—it offers insightful predictions for 2025 and beyond, along with actionable strategies to strengthen fraud prevention measures and ensure your business stays ahead of the curve.

Key Insights from the Report

• Biometric Fraud Rate Hits a Quarterly High of 16%: Biometric fraud has surged, with a quarterly average of 16%, marking the highest rate recorded over the past three years. This upward trend indicates that fraudsters are increasingly targeting biometric verification methods.

• Fraud at Authentication 4x Higher for Returning Users: The risk of fraud at the authentication stage is disproportionately higher for returning users. Fraud rates for this group are now four times greater than for new registrants, highlighting the rising threat of account takeover fraud.

• Mobile SDKs Prove to Be a Powerful Fraud Prevention Tool: Mobile SDKs have emerged as the most effective solution for preventing fraud, detecting 68% of fraud cases, which is twice as high as other integration methods such as APIs. This data reinforces the importance of choosing the right tools to safeguard user accounts.

The Risks That Lie Ahead

The report also exposes the rise of identity farming as a key part of layered money laundering and how it’s impacting the digital landscape in Africa. It outlines key action points that businesses, regulators, and service providers must consider in order to protect themselves, their customers, and their digital identities.

The stakes are high—fraud erodes trust in digital services, and the ripple effects impact the entire digital economy.

Stay ahead of the curve—download the report today and discover actionable strategies to safeguard your business and lead the charge against fraud in 2025 and beyond.

Today, we’re thrilled to share not one but two major updates that highlight the strides we’re making in shaping digital identity in Africa. At Smile ID, we’ve been privileged to witness the transformative power of identity verification in Nigeria.

Today, we’re proud to announce our crossing of the 200 million identity verification milestone and unveil the 2024 Nigeria eKYC Report—a first-of-its-kind analysis that highlights the transformative strides Nigeria has made in digital identity verification.

This month, we surpassed 200 million identity verifications across Africa, doubling our impact in just 11 months. This milestone reflects the growing trust in our solutions to deliver secure, reliable, and scalable identity verification for businesses like yours.

We’re empowering businesses to onboard millions of users securely, preventing thousands of fraud attempts, and driving financial inclusion across Africa.

This has been made possible by our valued customers, partners, and dedicated team. Thank you for supporting our journey so far.

Nigeria’s First Ever eKYC Report

As we celebrate this milestone, we’re also reflecting on one of the insights that have brought us here—insights we’re proud to share in the 2024 Nigeria eKYC Report, the first comprehensive analysis of Nigeria’s digital identity landscape.

This report comes at a critical time as digital identity verification becomes central to fostering trust, driving compliance, and scaling business operations. Using anonymised data from our verifications, the report highlights:

• Biometric verifications doubled, reflecting the shift toward fraud-resistant systems.

• NIN-based verifications surged 80%, positioning NIN as Nigeria’s eKYC cornerstone.

• 98% NIN database uptime, a benchmark for reliability in identity verification.

And more…

It also provides a clear view of Nigeria’s progress in eKYC adoption, key trends shaping digital identity verification and insights for businesses looking to scale securely in the digital economy.

Until next time,

The Smile ID Team.

Mobile money has transformed the financial industry across Africa, revolutionising access to financial services since its early days with M-Pesa in Kenya. This widespread adoption, accelerated further by the pandemic, has unlocked unprecedented levels of financial inclusion, allowing over 469 million people in sub-Saharan Africa to access banking services as of 2020. However, as mobile money becomes a mainstream financial service, it has also attracted a wave of cyber threats and fraudulent schemes that undermine its promise of secure, accessible financial services.

The Bright Side: Mobile Money as a Driver of Financial Inclusion

The impact of mobile money on financial inclusion in Africa cannot be overstated. From bill payments to seamless transfers, mobile money has enabled millions to participate in the economy securely and conveniently. In 2022, the number of mobile money accounts grew by 13%, with daily transaction values surpassing $1.45 billion globally, according to the GSMA’s 2023 State of the Industry Report on Mobile Money. For many, mobile money services represent the primary means of handling finances, creating a lifeline for those who previously had no access to banks.

The Dark Side: Mobile Money’s Vulnerability to Fraud

Despite its advantages, the mobile money ecosystem is increasingly vulnerable to fraud. Due to limited digital literacy and a lack of robust data protection measures, 31% of users in sub-Saharan Africa report needing assistance to use their mobile money accounts, a statistic that exposes a knowledge gap easily exploited by cybercriminals. Mobile money fraud has become a complex, multi-faceted issue, affecting users from all backgrounds.

Types of Mobile Money Fraud

1. Identity Theft and SIM Swap Fraud
   Identity theft is among the most common types of fraud targeting mobile money users. In Kenya, for example, fraudsters stole 500 million KES after illegally registering 123,000 mobile SIM cards using stolen identities. By swapping SIM cards and impersonating account holders, these criminals take out loans and transfer funds without users’ knowledge.

2. Social Engineering Scams
   Scammers frequently employ social engineering tactics to gain unauthorised access to accounts. This method is particularly common in countries like Uganda, where fraudsters impersonate familiar contacts or pose as service representatives to gain trust. Social engineering scams often involve misleading calls, phishing texts, and fake promotions that trick users into revealing their account details.

3. Money Laundering and Terrorism Financing
   Criminals also exploit the relatively low-value limits on mobile transactions to launder money in small amounts, making it easier to evade regulatory scrutiny. 

4. Fraudulent Promotions and Fake SIM Swaps
   In countries like Malawi, cybercriminals manipulate users through fake promotions and SIM swaps. The monthly impact of such schemes in Malawi is estimated to reach $117,000, highlighting the need for user education and awareness around fraudulent promotions.

Countermeasures: Strengthening Mobile Money Security

To address these growing threats, mobile money providers, regulators, and governments are working together to implement countermeasures that protect users:

1. Enhanced Identity Verification
Stronger identity verification through biometric solutions such as facial recognition and fingerprint scanning is essential for preventing unauthorised account access. In Nigeria, for instance, the National Identification Number (NIN) has been linked to mobile SIMs, enhancing security and deterring fraud.

2. Consumer Education Programs
Educating users about fraud tactics, such as recognising phishing messages and avoiding fake promotions, can significantly reduce susceptibility to scams.  Mobile money providers can organise regular awareness campaigns to teach users about secure account practices, such as:

• Not sharing PINs or passwords with anyone.

• Ignoring unsolicited calls or messages that request personal information or OTPs.

• Double checking phone numbers and recipient names before making transfers.

3. Implementing SIM Swap Protections

SIM swap scams are a growing threat where fraudsters convince mobile operators to transfer a user’s phone number to a new SIM, allowing access to their mobile money account. Providers should implement multi-layered SIM swap detection protocols, such as confirming the user’s identity through biometrics or requiring additional PINs and verifications before authorising a SIM swap.

Bottomline: Safeguarding the Future of Mobile Money

As mobile money continues to thrive in Africa, ensuring its safety is crucial to preserving trust and promoting financial inclusion. By implementing strong identity verification measures, educating users, and investing in SIM swap protection and advanced fraud detection technologies, Africa can build a mobile money ecosystem that stands resilient against evolving cyber threats. 

Fraud Watch

• NFIU to Collaborate with SEC to Enhance Anti-Money Laundering System

  The chief executive director (CEO) of the Nigerian Financial Intelligence Unit (NFIU) says the agency is committed to collaborating with the Securities and Exchange Commission (SEC) to enhance the effectiveness of its anti-money laundering (AML) and combating the financing of terrorism (CFT) systems. Read more here

• South Africa Records a 32% Increase in Fraud Incidences Over the Past Year

  The 2024 fraud statistics show a 32% increase in the number of fraud incidents reported to the Southern African Fraud Prevention Service in 2023. Those figures also reveal a 62% increase in fraud listings. Read more here.

Trending Stories - Country Coverage

• Crypto and Compliance: Navigating New Regulatory Waters

  In response to recent crypto compliance challenges, the Financial Sector Conduct Authority (FSCA) and other regulators like the Financial Intelligence Centre (FIC) have implemented several measures to ensure that the rapidly evolving world of cryptocurrency operates within a secure and well-regulated framework. Read more here.

• FATF Commends Nigeria’s Efforts at Strengthening Anti-Money Laundering, Counter-Terrorist Financing

  The Financial Action Task Force (FATF), has recognised the progress made by Nigeria towards strengthening her Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) measures. FATF which is the body responsible for setting global standards on AML/ CFT issues, made the commendation on Friday, at the end of its October Plenary Meeting in Paris, France. Read more here.

• Nedbank Fraud Warning for South Africa

  Nedbank has issued a warning to its customers, detailing the lengths criminals will go to get their banking details. In a notice sent to customers on its app, the group said that criminals use several tricks to steal one’s card information. Read more here.

• Nigeria to get off Grey List by May 2025 – CBN

  The Central Bank of Nigeria (CBN) has announced that the apex bank is engaging at the highest level to facilitate Nigeria’s removal from the Financial Action Task Force’s (FATF) “grey list,” an anti-money laundering watchlist by May 2025. Read more here.

Let’s hear from you

Have questions? Hit reply and let's chat about anything fraud or AML compliance-related in Africa.  

Until next time,

The Smile ID Team.

Africa’s digital landscape is booming—fintech, mobile money, and e-commerce are thriving, and internet penetration is rising. However, with this rapid growth comes an alarming increase in cyber threats. Cybercrime has become a significant issue across the continent, hitting businesses, financial institutions, and even government agencies.

In the first quarter of 2024 alone, African businesses saw a 20% surge in cyberattacks, compared to the same period in 2023, averaging 2,373 attacks per organisation per week, according to a Check Point report. As African countries strive to become more connected, cybercriminals are exploiting weaknesses in identity infrastructure and security systems, costing the continent $4 billion annually in losses.

Source - Check Point report

What’s Driving the Surge in Cyber Threats?

Here are some of the key reasons behind the surge:

1. Digital Expansion Without Adequate Security

Africa is experiencing a digital revolution, but the pace of digital transformation has far outstripped the investment in cybersecurity. Financial institutions and telecom companies are some of the most targeted sectors. In recent times, we have seen major fintechs in Africa lose billions to security threats.

According to the Africa Financial Industry Barometer Survey 2023, 97% of leaders from Africa’s financial institutions named cybercrime as the leading threat to the industry. The lack of robust security systems makes companies vulnerable to increasingly sophisticated attacks, including ransomware, phishing, and fraud.

2. Poor Infrastructure and Identity Fraud

One of the biggest vulnerabilities lies in Africa's poor infrastructure, which makes identity fraud a growing concern. Weak identity verification systems, limited access to digital ID databases, and fragmented records across different institutions make it easier for cybercriminals to commit fraud.

A report by Interpol in 2023 highlighted that identity theft is one of the most common forms of cybercrime in Africa, affecting everything from mobile money transactions to government services. This problem is exacerbated by the fact that less than 60% of Sub-Saharan Africans have registered digital IDs, and the lack of unified systems across borders makes it difficult to track fraudulent activities.

Source - World Bank

Countries like Nigeria and South Africa are working to improve their national identity systems, but the slow rollout leaves gaps that cybercriminals continue to exploit. 

3. Weak Legal Frameworks

Africa faces a cybersecurity regulation gap. Only 72% of African countries have implemented specific cybercrime legislation, compared to 91% in Europe, according to UN Trade & Development. While some countries like Nigeria, Kenya, and South Africa have robust cybersecurity laws, enforcement is inconsistent, leaving gaps for cybercriminals to exploit.

Source - Unctad

In South Africa, for example, a $16.5 million loss to cybercriminals over the past decade highlights how slow-moving and fragmented regulations can exacerbate the problem. Similarly, Kenya experienced a 943% increase in cyber threats between Q3 and Q4 of 2023, highlighting the urgency for better legal and technical defences.

4. Lack of Cybersecurity Awareness

A significant portion of Africa’s population and its business community remain unaware of cyber threats. This lack of education and preparedness creates an environment ripe for exploitation. Phishing, business email compromise (BEC), and SIM card fraud are common in the region, with both individuals and businesses falling prey.

For instance, MTN reportedly lost $53 million in mobile money fraud in Nigeria in 2022, and Safaricom lost over $4 million to SIM card fraud in the same year. Such incidents underline the dire need for cybersecurity awareness and training across the continent.

Africa’s cybersecurity vulnerabilities stem from several key factors:

• Inconsistent Regulation: While many African nations have cybercrime laws, enforcement and regional cooperation remain inconsistent. Libya, Chad, and the Central African Republic are among the countries still lagging behind in passing or enforcing cybersecurity legislation.

• Economic Constraints: Cybersecurity investment is still relatively low across the continent. Many governments and businesses struggle to allocate enough resources to adequately protect their systems, which leaves them exposed to sophisticated cyber threats.

• Rapid Digital Adoption: While digital transformation is positive for Africa’s economic growth, it also opens up new avenues for cyberattacks. The increase in internet-connected devices and financial services creates more vulnerabilities for criminals to exploit.

One of the most effective tools in combating cyber threats is robust identity verification. With the rise of digital services across Africa, ensuring that users are who they claim to be has become critical in the fight against cybercrime. Identity verification can significantly reduce the risk of identity theft, fraud, and account takeovers, which are common tactics used by cybercriminals to infiltrate systems and steal sensitive information.

Africa’s digital revolution holds incredible promise, but it comes with significant risks. As cyber threats continue to rise, governments, businesses, and individuals must take proactive steps to bolster security. By addressing regulatory gaps, improving education, and investing in cybersecurity infrastructure, Africa can both foster its digital growth and protect against the rising tide of cybercrime.

Fraud Watch

• Almost 6 million South Africans have Cryptocurrency Accounts, and SARS is coming for them

  A new South African Revenue Service (SARS) alert about crypto asset compliance ends with this stern injunction from Commissioner Edward Kieswetter. The taxman is looking for anyone who has not declared crypto held in local or offshore exchanges. Read more here

• 5 Major Banks Slapped with Fines in South Africa

  The Prudential Authority (PA), is mandated to supervise and enforce accountability institutions’ compliance with the provisions of the Financial Intelligence Centre (FIC) act or any order or directive made in terms thereof. Amid South Africa’s more significant push to get off the Financial Action Task Force’s (FATF’s) greylist, the PA has also issued administrative sanctions nationwide. Read more here

Trending Stories - Country Coverage

• South Africans Now Required to Declare Crypto Assets as SARS Expands Tax Compliance

  The days of quietly holding onto your crypto assets without reporting them to the tax authorities are nearing an end as the South African Revenue Service (SARS) announced that crypto assets will be included in its compliance programs. Read more here.

• NFIU Boss Seeks Review of Anti-Money Laundering Law 

  The Chief Executive Officer of the Nigerian Financial Intelligence Unit, Hafsat Bakari, has called for the adjustment of the Anti-Money Laundering and Counter-Financing of Terrorism and Proliferation framework to accommodate those in the private sector. Read more here

• FSCA Sets New Record For FICA Penalties 

  The 2023/24 Integrated Report of the Financial Sector Conduct Authority ("FSCA") notes that the FSCA has set a new record with penalties during the year under review totalling over R943 million on 31 persons. This is a significant increase from the previous year's R100 million, which was imposed on 44 persons. Read more here

Have Your Say

What measures are you or your business taking to combat account takeover fraud? Have you encountered any security challenges in your online transactions? We’d love to hear from you! Reply to this newsletter and share your experiences.

Until next time,

The Smile ID Team.

If you've ever wondered how someone could hijack your account or why your trusted fintech or online platform is pushing for stronger security measures and authentications—this is why. Account takeover (ATO) fraud is becoming one of the most common cyber threats in Africa, targeting everything from personal bank accounts to digital wallets and even business platforms.

In a continent that’s seeing rapid digital growth, especially in fintech and e-commerce, ATO fraud is a rising concern. From fintech apps to e-commerce platforms, cybercriminals are becoming more creative, and the consequences for both consumers and businesses can be devastating.

Whether you’re a business leader, tech enthusiast, or just someone who relies on mobile banking or online shopping, this is an issue you need to know about.

Account Takeover Fraud happens when a fraudster gains access to a user’s account, often through stolen credentials, phishing scams, or weak security. Once inside, they can drain funds, make unauthorized purchases, or even use the account to carry out more elaborate fraud schemes.

In 2024, account takeover fraud surged by 24% globally, with countries like South Africa and Nigeria experiencing significant spikes due to the rapid adoption of mobile and digital banking. As Africa’s digital landscape grows, so does the risk of ATO fraud.

Fraudsters don’t just rely on brute force; they have a variety of clever tactics up their sleeves. Here’s a look at some of the common methods they use:

1. Credential Stuffing: Using previously stolen login credentials from data breaches, hackers attempt to log in to multiple accounts, hoping the same passwords have been reused across platforms.

2. Phishing Attacks: Fraudsters send fake emails, text messages, or even social media messages designed to trick users into sharing their login details or other sensitive information. 

3. SIM Swap Scams: Fraudsters convince mobile network operators to switch a victim's phone number to a new SIM card, giving them access to one-time passwords (OTPs) and multi-factor authentication (MFA) codes used to protect accounts.

4. Malware & Keyloggers: By infecting devices with malware, fraudsters can track every keystroke a user makes, giving them access to passwords and sensitive account information.

Once they’ve successfully gained access, fraudsters can empty accounts, make fraudulent purchases, or even use the account for more extensive criminal activity like money laundering.

The Cost of Account Takeover Fraud to African Businesses

Account takeover fraud is more than just an inconvenience—it’s a serious financial and reputational risk for African businesses. E-commerce platforms and fintech companies, which handle a high volume of digital transactions, are especially vulnerable.

The costs don’t end with the stolen funds. Businesses often face expensive chargeback fees, recovery costs, and lost customers who no longer trust the platform. Rebuilding that trust can be difficult, especially in a market where consumers are still warming up to digital services.

Here’s how businesses across Africa can defend against this growing threat:

1. Strengthen Identity Verification: Ensure that you have robust Know Your Customer (KYC) processes in place. Implement multi-factor authentication (MFA) and biometric authentication to make it harder for fraudsters to gain access.

2. Use AI to Detect Fraud Patterns: Fraudsters evolve quickly, and your security measures should too. AI-powered systems can analyse user behaviour and flag suspicious activities, allowing businesses to take action before major damage is done.

3. Real-Time Monitoring: Keep a close eye on transactions. Detecting unusual activity in real-time—like large withdrawals or a spike in transactions from different IP addresses—can help prevent fraud from escalating.

4. Educate Your Users: One of the best ways to combat phishing attacks and SIM swap scams is by educating users. Simple reminders about password hygiene, avoiding suspicious links, and how to identify scam messages can go a long way in preventing attacks.

Looking Forward: A Safer Digital Ecosystem in Africa

As Africa’s digital economy continues to thrive, both consumers and businesses must stay vigilant. The rise of account takeover fraud highlights the need for stronger cybersecurity practices across the continent’s fintech and digital services ecosystem.

Fraud Watch

• CBN Directs Payment Service Providers to Begin PoS Transaction Tracking to Fight Fraud

  The Central Bank of Nigeria has directed that all Point of Sale operators must route transactions through licensed payment terminal service aggregators. Read more here

• Reserve Bank Fines HSBC and Bidvest Bank for Non-Compliance with the Financial Intelligence Centre Act

  The South African Reserve Bank’s Prudential Authority has imposed significant fines on HSBC Bank Plc and Bidvest Bank for failing to comply with the provisions of the Financial Intelligence Centre Act (FIC Act). These penalties come as part of ongoing efforts to. Read more here.

• SARS coming for millions of crypto traders in SA

  The South African Revenue Service (SARS) has expressed concern that citizens trading in cryptocurrencies are not declaring it on their tax returns. He says a staggering number of more than 5.8m South Africans hold a crypto asset, with Southern Africa boasting the largest uptake of Bitcoin in the world. Read more here

Country News Coverage

• 50 Shades Of Greylisting: When Will South Africa Meet The FATF Requirements?

  South Africa has been a member of the FATF since 2003. In a Mutual Evaluation Report, in 2019, the FATF concluded that South Africa had a solid legal framework for combating money laundering and terrorist financing, but significant shortcomings remained. Read more here.

• FIC Cracks Down on Non-Compliant Accountable Institutions

  Some accountable institutions' failure to submit their risk and compliance returns (RCRs) has proved costly to both the institutions and South Africa’s efforts to get off the Financial Action Task Force’s grey list, highlighting a significant gap in compliance. Read more here.

Have Your Say

What measures are you or your business taking to combat account takeover fraud? Have you encountered any security challenges in your online transactions? We’d love to hear from you! Reply to this newsletter and share your experiences.

Until next time,

The Smile ID Team.

As Africa's e-commerce sector continues to experience unprecedented growth, a new wave of opportunities is emerging for businesses, entrepreneurs, and consumers alike. Digital platforms are revolutionising how Africans shop, pay, and engage with services, creating a thriving online marketplace expected to generate up to $46.1 billion by 2025. But with this rapid expansion comes a significant challenge—fraud.

The embrace of online shopping has inevitably attracted cybercriminals, and fraud is now a serious concern for Africa's growing e-commerce ecosystem. The African Union’s cybersecurity framework estimates that Africa loses $4 billion yearly to cyberattacks and fraud-related losses.

Fraudsters constantly evolve, exploiting vulnerabilities in digital systems and targeting platforms with lax identity verification measures. Common types of e-commerce fraud include:

1. Account Takeover (ATO): Cybercriminals gain unauthorised access to user accounts by phishing, credential stuffing or exploiting vulnerabilities. This leads to identity theft, stolen funds, or fraudulent purchases.

2. Payment Fraud: Fraudsters use stolen payment details to complete transactions, exposing businesses and consumers to financial loss.

3. Refund Fraud: Some criminals exploit refund policies by falsely claiming a purchase did not arrive or was damaged, securing refunds for items they never intended to return.

These activities are not just a threat to individual consumers but can devastate businesses, tarnish reputations, and deter further online commerce. The solution? Robust identity verification systems.

Identity verification has quickly become a crucial line of defence for Africa’s e-commerce platforms, especially in the face of these growing threats. By ensuring that every user is who they claim to be, businesses can significantly reduce their exposure to fraud. Here’s how digital identity verification can safeguard the e-commerce sector:

1. Secure Onboarding of Customers: E-commerce platforms must prioritise Know Your Customer (KYC) processes during account creation. By verifying a customer’s identity with biometric checks, ID verification, and digital footprints, businesses can prevent fraudulent accounts from being created in the first place. A strong KYC framework is often the first step in filtering out bad actors.

2. Real-Time Transaction Monitoring: Fraudsters typically engage in suspicious transaction patterns, like rapid large purchases or shipping items to multiple locations. AI-powered identity verification tools can detect these red flags in real-time and trigger an immediate response, reducing the likelihood of successful fraud attempts.

3. Multi-Factor Authentication (MFA): Adding extra layers of security, such as biometric authentication or SMS-based verification, ensures that even if a fraudster manages to steal login credentials, they cannot complete the transaction without additional identity proof. Platforms leveraging MFA report a significant drop in account takeover attempts.

4. Reduced Chargebacks and Financial Losses: With effective identity verification in place, businesses can lower the number of fraudulent transactions that result in costly chargebacks. 

To combat fraud effectively, collaboration between e-commerce platforms, fintechs, and regulators is essential. As Africa’s digital marketplace expands, stakeholders must work together to implement regulatory standards, share threat intelligence, and foster a culture of consumer awareness around online security.

The Road Ahead: What’s Next for Africa’s E-Commerce Sector?

The future of e-commerce in Africa is promising, but its continued success depends on the industry's ability to address fraud risks head-on. The ability to establish robust identity verification procedures plays a crucial role as Africa’s e-commerce platforms can build trust, enhance user experience, and create a safer digital marketplace for all.

Identity is currency and protecting it has never been more important than it is today. As e-commerce continues to thrive, let’s ensure that both consumers and businesses are safeguarded against the evolving tactics of fraudsters.

Fraud Watch

• CBN Directs Payment Service Providers to Begin PoS Transaction Tracking to Fight Fraud

  The Central Bank of Nigeria has directed that all Point of Sale operators must route transactions through licensed payment terminal service aggregators. Read more here

• Mobile, POS fraud dominate fraud cases in Q2

  Fraud cases involving computer, mobile, and point-of-sale systems accounted for the majority of fraudulent activities recorded in Nigeria during the second quarter of 2024. This was revealed in the latest fraud report by the Financial Institutions Training Centre, which detailed a total of 11,532 cases during the period under review. Read more here

• Nigerian Banks Suffer N42.6 Billion Loss to Fraud in Q2 2024

  A surge in fraudulent activities across banking platforms in Nigeria led to a loss of N42.6 billion by Nigerian banks in three months between April and June this year. Read more here

Country News Coverage

• SA on course to Exit Grey List in 2025

  National Treasury's acting DG has been quoted as saying we're on track to get off the grey list of the Financial Action Task Force (FATF) in 2025. Read more here.

• Nigerian Banks Lost N42.6bn to Fraud in Three Months

  Nigerian commercial banks have lost a total sum of N42.6bn to fraud and forgeries over a three-month period, a new report has stated. The amount lost in the second quarter of 2024 alone exceeded the total amount lost to fraud by the banks throughout the entire year of 2023. Read more here.

• NIMC, SecureID Partner to Deepen Identity Security

  The National Identity Management Commission and SecureID, Africa’s smart card manufacturing company, have strengthened their partnership to enhance Nigeria’s national identity management landscape. Read more here.

• CBK Introduces New Rules for Large Bank Transactions

  Banks have started preparing for changes in the process of making high-value transactions, following a recent circular by the Central Bank of Kenya. Read more here.

Ask the Experts: Fraud Trends & Identity Verification

Have questions about the latest fraud trends or identity verification solutions in Africa? Hit reply, and our experts will be happy to assist.

Until next time,

The Smile ID Team.
Pioneering secure digital identity solutions across Africa.

Fraud has always been a menace to financial institutions, but a dangerous evolution has occurred in recent years—Fraud as a Service (FaaS). This new wave of organised digital crime is making it easier for bad actors to access sophisticated tools and techniques designed to bypass security measures. What’s most alarming is how accessible these tools have become across Africa.

FaaS: The New Business Model for Criminals

FaaS is essentially a criminal business model where hackers and fraudsters offer services and software designed to commit fraud against others. These services are often sold or rented out via online dark markets, making them accessible to anyone willing to pay. A quick search can uncover tools that enable phishing attacks, card fraud, identity theft, and more.

Across Africa, the rise of mobile transactions and digital financial services has opened new doors for these criminals.

Why FaaS is a Growing Concern for African Financial Institutions

• Low Barriers to Entry: FaaS allows individuals with little technical expertise to carry out complex fraud schemes, creating an ever-growing pool of fraudsters. 

• Targeting Mobile Money & Digital Wallets: Africa is the global leader in mobile money making the industry a prime target. Fraudsters can rent out or purchase malware and phishing kits to siphon money from unsuspecting users.

• Cross-Border Collaboration: Criminals are collaborating across borders, making it difficult for local law enforcement and financial institutions to keep up. Coordinated fraud attacks on financial services in one country can quickly spread across borders.

What Fraud Methods Are FaaS Providers Using?

FaaS services offer an alarming variety of tools to fraudsters, including:

1. Phishing-as-a-Service: Fraudsters can rent phishing kits that mimic legitimate platforms like banking apps, online stores, or payment processors. These kits are used to trick users into providing sensitive information like passwords or account details.

2. SIM Swap Fraud: FaaS providers make it easier for criminals to carry out SIM swap fraud, where they transfer a victim’s phone number to a new SIM card to access mobile banking and reset passwords.

3. Carding-as-a-Service: Criminals can use FaaS platforms to buy stolen credit card details and automated software for testing cards on e-commerce websites. 

4. Botnets for Account Takeover (ATO): Fraudsters can rent botnets to automate attempts at breaking into users’ accounts by trying multiple password combinations.

Protecting against FaaS

• AI-Powered Fraud Detection: African financial institutions must implement AI-driven tools that can detect suspicious behaviour in real-time. Machine learning models can help flag unusual patterns, such as rapid logins from different locations or sudden changes in spending behaviour.

• Collaboration with Regulators: financial institutions must work closely with local regulators and law enforcement agencies to stay ahead of the evolving fraud landscape. Governments, too, must improve the legal framework for dealing with cyber fraud across borders.

• Customer Awareness Campaigns: Educating users about the dangers of fraud, especially on how to avoid phishing scams and SIM swap fraud, is essential. Platforms should also encourage two-factor authentication (2FA) and other security practices to reduce risk.

• Compliance Automation: Ultimately, businesses can guard against FaaS criminals by using an end-to-end anti-fraud solution

Ultimately,

As Africa’s fintech ecosystem continues to thrive, the industry must tackle the challenge of money laundering head-on. By fortifying their defences, fintechs can protect not only their business but also contribute to a more secure and transparent financial environment across the continent.

Fraud Watch

• Crypto scammers now prefer Pig Butchering scams over Ponzi schemes

  In the past year, a fraud report revealed that Crypto scammers have pivoted away from running large and complex Ponzi schemes to favour more targeted pig butchering scams. Read more here

Country News Coverage

• Mastercard and Smile ID Collaborate to Accelerate Merchant Onboarding in Africa

  Mastercard has teamed up with Smile ID, a leading African digital Know Your Customer (KYC) provider, to streamline the merchant onboarding process for businesses in South Africa, Nigeria and across Africa. Read more here.

• South African Revenue Service (Sars) Turns Attention to Crypto traders, Sends Warning

  Recent developments have seen the South African Revenue Service (Sars) turn its attention toward crypto traders, who are now receiving notices based on information obtained from various crypto asset exchanges. Find out why here

• Money Laundering: EFCC warns Designated non-financial Business Operators

  The Economic and Financial Crimes Commission, EFCC, has called on Designated Non-Financial Businesses and Professions, DNFBPs, to conduct their dealings in line with the provisions of the  Money Laundering Prohibition and Prevention Act 2022. Read more here.

Ask the Experts

Let’s hear your thoughts or questions you may have. Hit reply and let's chat on anything identity verification or AML compliance related in Africa. 

Till next time,

The Smile ID Team.

Africa’s fintech scene is booming, reshaping how we transact, save, and send money across borders. The growth of fintech in Africa has unlocked new opportunities for remittances, allowing millions to send and receive money with ease.

However, this surge in cross-border transactions has also brought to light a serious concern: money laundering. Is this the next big challenge for Africa’s fintechs?

Remittances are a lifeline for many African households, with the continent receiving over $95 billion in remittances in 2021 alone. This figure continues to grow, fueled by digital platforms that make it easier than ever to send money home. 

But with this growth comes risk. The very features that make remittances so effective—speed, convenience, and cross-border reach—also make them attractive to money launderers. According to the Financial Action Task Force (FATF), remittance channels can be exploited to move illicit funds across borders with minimal detection.

The Impact on Fintechs

The implications for fintech companies operating in Africa are significant. With the rise of digital platforms facilitating remittances, the potential for abuse is higher.  The last thing a growing fintech needs is to be embroiled in a money laundering scandal. Besides legal and financial repercussions, the damage to reputation could be crippling.

Fintechs must be vigilant and proactive in their approach to combating money laundering. This includes implementing robust Know Your Customer (KYC) and Anti-Money Laundering (AML) measures.

How Fintechs Can Fight Back

1. Step-Up Surveillance: Fintechs need to leverage AI and machine learning to spot unusual trading patterns that could indicate money laundering. It’s about being smarter and faster than those who seek to exploit the system.

2. Regulatory Rigor: Compliance isn’t just a checkbox—it's a necessity. African fintechs must stay ahead of local and global AML regulations, ensuring their operations are airtight. This includes conducting thorough KYC during customer onboarding and frequent AML checks.

3. Empower Your Teams: Continuous training on the latest money laundering tactics and how to counter them will keep your staff sharp and vigilant.

The Road Ahead

As Africa’s fintech ecosystem continues to thrive, the industry must tackle the challenge of money laundering head-on. By fortifying their defences, fintechs can protect not only their business but also contribute to a more secure and transparent financial environment across the continent.

Fraud Watch

• New Scam on the Horizon, Mocking the Police

  Fraudsters are getting more brazen with their lies in the absence of any repercussions for stealing people’s money, frustrating efforts of the police and authorities. Read more here

Country News Coverage

• The new way scammers are picking their targets in South Africa

  According to the Southern African Fraud Prevention Service (SAFPS) 2024 fraud statistics, there has been a 32% increase in reported fraud incidents in the previous year. Learn more on the latest way scammers are picking targets in South Africa here

• FSCA Suspends License of KwaZulu-Natal-based state-owned development bank

  The Financial Sector Conduct Authority (FSCA) has suspended the licence of Ithala Limited. According to FSCA, this suspension is effective from 26 July 2024 and will remain in place until the bank meets the conditions for its licence to be lifted. Read more here.

Ask the Experts

Let’s hear your thoughts or questions you may have. Hit reply and let's chat on anything identity verification or AML compliance related in Africa. 

Till next time,

The Smile ID Team.

6 -

Picture this: You get a call from your CEO, urgently requesting a transfer of funds. Everything sounds legit—it’s their voice, their tone. But it’s not them. It’s a scammer using deepfake technology, and you’re caught in their web. Scary, right? 

On the other hand, it could be a fraudster completely generating realist images or IDs of a high-networth individual and using them to bypass KYC checks and access their accounts. These scenarios are becoming all too common across Africa.

Over the past year, the availability of user-friendly deepfake applications has skyrocketed. These tools, often available for free or at a low cost, enable criminals with minimal technical expertise to create convincing fake content.

Cybercriminals are increasingly using deepfakes to impersonate CEOs and other high-ranking officials in "CEO fraud" schemes. In one notable case, Fraudsters used AI to impersonate African Union Chief Moussa Faki, faked his voice and placed several video calls to European capitals, ostensibly seeking to arrange meetings. 

The African Union Commission revealed that the cybercriminals used fake email addresses to impersonate the organisation’s deputy chief of staff. These criminals arranged calls between foreign leaders and the AU Commission Chairperson, Mr. Moussa Faki. Spokesperson Ebba Kalondo confirmed that the pranksters conducted video calls with several European leaders using deepfake technology to mimic Mr. Faki.

Imagine how much easier that would be with the level of advancement deep fake technology has experienced within the last 1 year.

We’re All in Trouble, What Next? 

The big question becomes, how we protect against deep fakes? To answer this accurately, let's look at how deepfakes are created. 

• Data Collection: The AI algorithm is fed a large dataset of video or audio clips of the person to be mimicked.

• Training the Model: The AI learns the person's facial expressions, voice patterns, and mannerisms.

• Generating the Deepfake: Using this trained model, the AI can produce fake video or audio that appears authentic.

The nature in which generative AI content is created makes biometric-based solutions the most effective in combating them. Enhanced biometric verification methods, such as facial recognition and active liveness detection are crucial in the fight against deepfakes. Liveness tests provide better security with the ability to catch synthetic media and deepfakes.

Active liveness refers to specific tasks that the user is asked to perform (often part of a larger liveness system), whereby the recorded sequence of images (video) is then analysed to verify that the task was indeed correctly performed. If the user correctly performs the tasks, then the user has passed the 'active liveness' challenge and further verification checks can be performed (for example spoof detection). This solution leverages the user's biometrics.

AI voice detector could also be used to determine the source of an audio file, whether human or AI-generated.

Although technology plays a key role in combating these scams, businesses need to establish compliance policies that address the growing risk of generative AIs and train employees on how to approach different scenarios. 

Ultimately, combating generative AI deep fakes requires a blend of the right technological solutions and expertly trained humans. 

Fraud Watch

• Interpol Operation Nabs 300 with links to West African Cyber Fraud: Interpol announced on Tuesday its arrest of 300 individuals and seizure of $3 million in assets. Read more here.

• Specific Institutions Urged to Note Heightened Terror-Financing Risk in South Africa: To ensure greater awareness of the nature of the risks that exist, South Africa has recently completed its second Terror Financing National Risk Assessment (TF NRA 2024), alerting affected institutions on the higher terror-financing risk. Read more here.

Country News Coverage

• SARB Sanctions Giant Insurance Company for FICA non-compliance: This month, the South African Reserve Bank (SARB) announced that it had imposed an effective fine of R7 million on Safrican Insurance Company following a FICA compliance inspection. Read more here.

• SA’s Property and Legal Practitioners Keeping Country on Greylist: The Financial Intelligence Centre (FIC) says in a statement that it identified business sectors wilfully standing in the way of South Africa exiting the greylist and legal practitioners top of the list. Read more here

Ask the Experts

We have no questions for today and look forward to your submissions. Hit reply and let's chat on anything identity verification or AML compliance related in Africa.  

Till next time,

The Smile ID Team.

2023 has been a whirlwind year for identity technology in Africa. More and more African countries are moving towards biometric technology for identification, and with that has come a slew of policies, some more controversial than others. 

One policy that continues to divide opinion across the continent is biometric SIM registration. On one hand, security professionals think it is a great idea because it mitigates the risk of prepaid phones being used for criminal activities. On the other hand, data protectionists think the collection of biometric data poses a data security risk to individuals citing a lack of data privacy laws across the continent and oppressive government regimes. But as in many cases, the truth lies closer to the center. 

The Case for SIM Registration

The majority of Africans rely on prepaid SIM cards to access mobile services. 94% of mobile connections on the continent are made via prepaid SIMs — the highest of any continent. Prepaid cards make sense for Africans because they are affordable, accessible, and flexible. You can typically get a brand-new SIM card on any street in major cities for less than $2 and, in some countries, as low as 20 cents. SIM card affordability and accessibility, as well as a perception of network providers as being unreliable, have also created a culture of owning multiple SIM cards. 

% of mobile subscriptions that are prepaid across the world

Source: GSMA

Criminals also take advantage of cheap, accessible SIM cards to conduct their activities, including terrorist attacks, money laundering, and fraud. SIM swap fraud, in particular, is a significant challenge associated with prepaid cards. SIM cards are an access point to financial services for many Africans who rely on USSD banking or mobile money. A fraudster with substantial information on a victim can call their phone carrier and try to trick them into activating a SIM card under the pretense that they lost their original SIMs. Once activated, the scammer can use the SIM to access the victim’s financial accounts.

The reason most governments give for SIM registration is simple. If a SIM is registered to a known individual, it is less likely to be used to commit fraud. In the event that a SIM is used to commit a crime, it can be traced to the individual for proper investigation. The risk of SIM swap fraud is greatly reduced with biometric SIM registration as the scammers will have to provide biometric information, which is incredibly hard to fabricate, to convince network providers to activate a SIM for them.

SIM Registration Trends Across Africa

Countries across the world generally require residents and citizens to register SIM Cards, more so in Africa where 50 of 52 countries have regulations to that effect. During registration, subscribers are typically required to provide personal information like their full name, date of birth, home address, and a valid government ID.

In recent years, some African countries have passed regulations mandating the collection of biometric data during SIM registration. Some, like Nigeria and Ghana, have gone a step further to require residents and citizens to link their SIM cards to their foundational digital identity. A refusal to comply with the registration requirements usually leads to strict repercussions. Across the continent, over 80 million SIM cards have been temporarily or permanently blocked for non-registration according to publicly available data.

Source: GSMA, Biometric Update

Registration May Marginalize Communities

While great in theory, SIM registration policies come with some downsides. One of the most prominent of these is the potential exclusion of marginalized groups from economic activities. In most countries, proof of ID is a minimum requirement for SIM registration. According to a World Bank FINDEX report in 2019, Women were 9% less likely to have an ID than men in Subsaharan Africa. This potentially means tens of millions of women being unable to own SIM cards and access financial services on their own. 

The situation gets even more grievous for refugees and foreigners whose ID documentation processes are not usually prioritized. The top five refugee-hosting countries in Africa require proof of ID for SIM registration and offer mobile money services. 

Africa’s top 5 refugee-hosting countries

Safety concerns around the handling of biometric data

Data protection is an ongoing concern across Africa. With the increasing collection of personal data, especially biometric data,  for SIM registration, the concerns have only aggravated. On paper, data protection has improved on the continent with over 70% of African countries effecting laws or regulations to that effect as of 2023.  Many of the policies are recent and yet to be enforced leaving a legal vacuum for organizations to operate in.

Telcos are typically charged with handling SIM registration and biometric data collection, but there isn’t sufficient clarity over what they can and cannot do with the data. MTN, the continent’s biggest network provider has also revealed plans to start biometric data collection in Guinea Bissau and Liberia, two countries without data protection laws. Mobile Telecommunications Company (MTC), Namibia’s main telco has continued to mandatorily collect biometric data from subscribers despite a lack of data protection laws and the government announcing that it was an optional requirement.

The biggest concern critics have, however, is the likelihood of privacy abuse by government agencies. SIM registration laws give unfiltered database access to most governments across Africa, allowing them to potentially track and monitor citizens. Using their biometric registration data, governments can quite easily set up surveillance on unsuspecting citizens, monitoring everything from communication to finance. As many African administrations don’t have a stellar track record for upholding human rights, there are fears that governments may set up surveillance on minority groups, journalists, activists, and other groups likely to dissent. 

Conclusion:

With great power comes great responsibility. When quizzed about the potential risks associated with biometric sim registration, government administrators often point to their responsibility for national security as a trump card. Valid as it is, governments also have a responsibility to protect the privacy of their citizens. Ultimately the answer to the question of whether biometric SIM registration is problematic depends on how much value African leaders place on data protection. More countries are passing data laws, a sign that we’re moving in the right direction. Whether or not these laws will be enforced, especially for government agencies, remains to be seen. 

Onboarding users, while it may seem like a secondary function of agents, is crucial to ensuring that digital financial services remain secure. When they are asked to perform KYC and confirm identities, disruptive fintech, and traditional retail banks place a lot of trust in agents.

The benefits of providing financial services through agents

Undoubtedly, financial agents are pivotal in the African financial ecosystem, reaching communities that traditional banking cannot. They have unquestionably improved financial accessibility.

A comprehensive study by researchers from MIT, focusing on M-Pesa’s pioneering mobile money service, analysed how the rise in service agents impacted households across Kenya. They found that increased agent density (more agents available within a 1-kilometre radius) led to a significant rise in per capita consumption. For instance, households experiencing an average increase in agent density saw a 6% increase in per capita consumption, lifting many above poverty levels.

The study also highlighted a pronounced We I I positive impact on female-headed households, where an increase in agent density led to an 18.5% rise in daily per capita consumption and a notable reduction in poverty levels. Moreover, more agents led to a shift in women's employment from farming to business or retail occupations, facilitated by the ease of managing finances through mobile money. (Source) 

Evidence of financial agents' profound impact on banking access, poverty alleviation, and women's empowerment in traditionally underserved regions is undeniable.

However, as these services expand to reach across the continent, businesses must employ hundreds of thousands of agents to maintain their reach. With this exponential growth and armies of agents to train and watch over, the risks of fraud have also increased.

Source: Techpoint Africa | Safaricom

Risks with Agent Onboarding

In a study by GSMA, fraud was the most prominent risk agent, and nearly 55% cited fraud as a daily risk. However, urban agents seem to see significantly more cases of identity-related fraud.

“Identification-related risks (which can equate to fraud), such as a lack of ID or fake identification, were mentioned by 17% of urban agents but only 3% of rural ones. (GSMA)”

• Duplicate account fraud: Many agents are trustworthy community members looking to provide services to their peers. A few individuals become agents to carry out fraud attacks or abuse the power of account creation for themselves.
  

• Creating accounts for non-consenting individuals: When an agent is onboarding an individual, even while using photo verification, it can be challenging to determine if that individual has consented to an account being opened on their behalf. There are cases where an agent takes photos of unknowing individuals to use for signing them up for an account without their knowledge. (Lynshays example, neer more info)
  

• Coercion of an agent: Opposite of agents using individuals to create accounts for their advantage, in this type of attack, a customer manipulates an agent to help them perform a fraudulent account opening or transaction on their behalf.

Fraud continues after the onboarding process

• Overcharging: Many organisations and even the government have guidelines on what agents can charge, but there are few consumer protections to enforce correct charging.
  
  For example, though concrete data is limited in Nigeria, nearly 40% of agents are estimated to charge more than the maximum fees set by the Central Bank of Nigeria. (Source)
  

• Account takeover: Many agency banking services do little to authenticate a user after opening the account. With weak data protection, agents often have enough information stored from the user onboarding process to easily take over customer accounts and steal available funds. 

Low commissions may incentivise fraud

Agents make their money by facilitating transactions and collecting fees. The CBN has thorough guidelines on how much agents should charge depending on the type of transaction. The fees are already relatively low, often ranging from N50-N500 depending on the type and volume of transaction.

On top of this, competition among financial service providers and rapid inflation in many markets is pushing agent commissions lower and lower. Agents now, more than ever, are feeling the pinch. The economic model for agents, primarily based on transaction fees, is under pressure. The GSMA has reported that more agents than ever are struggling to maintain sustainable incomes with caps on fees and increasing competition.

This financial strain can lead to unethical practices to increase earnings, such as unauthorised transactions or account manipulation.

Challenges identifying agent fraud

Agents hold the keys to account creation. With unique access to financial systems, they can more easily hack systems and abuse account creation. Because of their trusted role in the system, agents can more easily make fraudulent accounts and transactions seem legitimate.

A few factors make agent fraud especially difficult to detect, even with advanced technical solutions.

• Insider Knowledge: Agents' deep understanding of the banking systems can be exploited to bypass security measures.
  

• Trust Factor: The trusted status of agents in their communities can make it difficult to suspect and identify fraudulent activities.
  

• Systemic Weaknesses: Inadequacies in financial institutions' monitoring and audit systems can allow fraudulent activities to go unnoticed.

Conclusion: Weighing the Benefits Against the Risks

Agent banking is a double-edged sword for African financial services. While it dramatically improves financial inclusion and accessibility, it also introduces fraud risks.

A multi-pronged approach involving hands-on training, more robust regulatory frameworks, advanced technological safeguards, and a culture of transparency and accountability can help mitigate these risks, but eliminating fraud risks will be challenging.

Perhaps there must be a balance. As long as the benefits of agent banking continue to grant increasing access to people and benefit financial services companies as they get access to a broader range of customers, some fraud may be tolerable. But we must now ask ourselves when the risks become too much to excuse.