Scammers show the dark side of mobile money in Malawi

The Reserve Bank of Malawi estimates that about 10.9 million people owned mobile money wallets in Malawi at the end the first quarter of 2023, compared with 1.2 million bank accounts. As mobile wallets become more popular and widespread, criminals have seen them as an opportunity to exploit users who may not be fully aware of the risks or security measures.

The fraudsters use SIM swapping, a process of manipulating mobile carriers into transferring a victim’s phone number to a new SIM card under their control which gives access to the victim’s mobile money and other accounts. They do this by identity theft, fake promotional SIM swap services, SMS fraud as well as impersonation by calling random numbers informing people they have property at the border that requires a fee for clearance, explained Allan Chongwe, a computer scientist at the Malawi University of Science and Technology (MUST).

Two years ago, Airtel Malawi and Standard Bank were ordered by a court to pay 120 million kwacha to businessman Billy Milimbo after losing tens of millions to fraudsters who accessed his funds through a SIM card swap scheme. It prompted scores of people to take to social media to voice their frustrations with their own stories of being scammed. Most of those people were unable to seek legal redress because they couldn’t afford representation.

While appearing before a parliamentary committee at the time, the two telecom giants in the country said although they are able to track down people involved, they needed more collaboration with security agencies to arrest the perpetrators.

In the two years since then things haven’t gotten much better for everyday consumers here who are still vulnerable to mobile money fraud and have few easy options to recover their funds through the major networks who run these services.

Consumer Association of Malawi executive director John Kapito said the networks have failed to protect or compensate the victims in an appropriate fashion. “Currently, the onus is on the customer, and it becomes a challenge for ordinary consumers to go through the process of following up and holding someone accountable,” he said.

Mobile money is often highlighted in development circles as one of Africa’s great success stories on the road to financial inclusion. Improved financial inclusion is seen as an important pillar of economic growth and development for low income countries like Malawi.

It’s important the network operators help put more significant effort into maintaining confidence in their mobile money platforms because if trust in these systems erodes over time it will be very difficult to regain and it will be a lost opportunity to bring more Malawians into the formal financial system.

TNM, Malawi’s largest phone operator, acknowledged that some of the challenges with mobile money fraudsters had become increasingly sophisticated evolving from street level fraud to “well-organized parallel call centers duping customers nationwide.”

But the company said the number of fraud cases on its network have fallen.“On its part TNM has noted a drop in cases where attempted mobile phone fraud has been successful,” wrote Limbani Nsapato, its corporate affairs manager, in an email to Semafor Africa. Nsapato claimed the drop could be attributed to TNM’s awareness campaigns in local media.

Kenya, Africa’s largest mobile money market with more than 50% of its GDP moving over mobile money platforms, according to the Central Bank of Kenya, has also seen a rise in scams.

Dr Bright Gameli, a cyber security researcher, told Semafor Africa that scammers are successful because most people are not aware of the risks. He said most scammers pick ID and phone numbers from log books when people access buildings and they work with some insiders in telecom companies. “One way to prevent people from being scammed is that awareness should be available in all languages. The telecom companies also have to increase security of the transaction processes although you don’t want to complicate things.”