A CBN investigative report provides a glimpse into the ownership of the fintech firms and their financial dealings.
A court recently placed restrictions on the bank accounts of six online investment companies. Four of these companies recorded about N15 billion turnover in two and a half years, a report by the
That figure may be relatively small compared to deposit money banks, but in interviews with PREMIUM TIMES, experts say it foretells the huge impact that the activities of financial technology (fintech) companies will have on the Nigerian economy in the near future, and why regulators must start paying serious attention to them.
Tope Fasua, an economist, said "it shows that they are beginning to have some systemic importance in which case it may have a reverberating effect on the whole economy."
That is "why regulators must continue to be extremely careful, in terms of their regulation and understanding of what the fintech companies do," he added.
But, echoing Mr Fasua's concern,
It "puts our people at risk because these funds are not governed by the relevant financial regulators,"
The four companies with a total N15 billion turnover from
All the firms have denied any wrongdoing.
The firms are
CBN's report on the investigation of their activities indicates that Rise Vest had a turnover of N1.97 billion between
It added that
The naira components of the turnovers for the four companies summed up to N14.979 billion while the dollar components for the three with records of foreign exchange dealings added up to
The two other companies whose financial dealings were not captured in the CBN investigative report are Bamboo Systems Tech. Ltd Opns and CTL/Business Expenses.
CBN allegations, court's freezing order
Following an ex parte application filed by the CBN on
In asking the judge,
Specifically, the CBN in its application, which relied on the report dated
It also alleged that the firms were "accessing/procuring foreign exchange via their banks from the Nigerian foreign exchange market via several bureau de change, and international money transfer operators".
It added that under the alleged scheme, the firms had transferred cash deposits of more than
It also accused them of trading in foreign securities and cryptocurrencies in "contravention of CBN circular referenced TED/FEM/FPC.GEN/01/012 and BSD/DIR/PUB/LAB/014/001 dated
"The aforesaid transactions undertaken by the defendants/respondents using their bank accounts has caused and is causing significant financial loss to the members of the public if left unchecked in order to mitigate," stated an affidavit deposed to by
The judge ordered that the firms' identified bank accounts be frozen for 180 days, but said the affected companies were free to challenge the order before the period lapses.
He, however, adjourned the matter till
Some of the companies, in the wake of the court order, assured their customers of the security of their funds, and signalled they would be taking up the matter.
The 'Report of the review of the activities of
Rise Vest, according to the CBN, was incorporated in
The shareholders of the company at incorporation were
It partners with companies involved in payment settlements as well as internal and international remittances, the CBN said.
The regulator added that information on the company's website "indicated that it is an asset management company, which provides a platform for customers to invest in foreign instruments using an app called 'Risevest'."
Based on the CBN's review, the firm "consummated its asset management activities" through its
Inflows into the amount were mainly from retail investors through two Payment Service Solution Providers (PSSPs), which are firms licensed by the CBN to provide a bridging infrastructure, end-to-end electronic payment solutions, systems and services to stakeholders within the financial services space.
The two PSSPs through which the firm received inflows are Flutterwave, accounting for about N500 million, and Monnify, responsible for N967.58 million.
Outflows from the account were said to include payment of N500 million to Paystack, N110million to cryptocurrency traders like BuyCoins, and N350million to Beltium Venture.
The firm's offence, according to the CBN, is that it traded in cryptocurrency in contravention of its
The CBN said the firm, incorporated in
It was incorporated to carry on the business of software design, implementation development, maintenance and consultancy amongst others. It is said to be related to One Global Med. Technology,
It operates an online app, Bamboo, that provides a medium for investors to buy and sell stock exchange traded funds (ETFs), the CBN said.
The company's index funds and derivatives are listed in major exchanges in the
Its Bamboo app works through collaboration with
CBN's review of its domiciliary account with
Cash inflows into the account were from
Outflows, according to the CBN, were to forex operators like
A naira account of the firm with
Major inflows to the account were said to be from
Major outflows were said to include "investible amounts from sundry investments" transferred to Paystack.
CBN said its review showed that
The firm, said to be owned by
It is related to
The CBN says its review showed that transactions on Chaka.com are settled through
The company, according to CBN, also owns a mobile/digital investment app (Chaka.com), which provides a gateway for investors willing to invest in local and foreign securities from as low as N1,000 or
The company's three domiciliary accounts were said to have recorded an aggregate turnover of
Inflows into the account came from
Outflows went to companies like
A review of the naira accounts showed an aggregate turnover of N9.26 billion in the same period, the CBN said.
The inflows were said to include transfers from a power distribution company -
The outflows included transfers to entities like
The apex bank said the inflows and outflows on the bank accounts are "indicative that
The firm incorporated on
It was said to have been incorporated on
The company also owns a mobile digital investment app, Trove, which provides a gateway for investors willing to invest in local and foreign securities as well as cryptocurrencies from as low as N1,000 or
A review of the company's domiciliary account with
Firms like
Outflows from the account included offshore transfers to
For its naira account with the same bank, CBN said it showed an aggregate turnover of N3.27 billion.
Inflows into the accounts were from PSSPs like
Outflows, it said, were to companies involved in B2B Payment Solutions, as well as cryptocurrencies like
Based on the inflows and outflows on the accounts, CBN said, the firm "was actively engaged in trading in foreign exchange and cryptocurrencies using FX sourced from illegal FX operators and Nigerian FX market."
Growth of Fintech, concerns
PREMIUM
Mr Fasua described the growth of fintech as "a new thing" in
He, however, warned that it comes with the risk of "financialisation as against industrialisation of the economy."
This, he explained, is a situation where everybody wants to play in the financial sector "where all they do is look smart and make a whole lot of money, especially trading forex."
He said the real fintech organisations "are set up and registered with the appropriate authorities which help safeguard the assets of the investors," while the others are mere "cooperatives," unregistered with the appropriate authorities but use deposits to trade in foreign exchange, and others.
He called for "measures against such unregistered companies who are taking advantage of our people."
"Illegal financial deals are crippling our people who sometimes even take loans to participate in these supposedly FX deals," he said.
Mr Fasua too expressed concerns about the activities of some of the supposed fintech firms dabbling into things they were not registered for and whose funds were not insured by appropriate authorities like the
"One begins to wonder, what happens if they go down? Are they insured? Most of them are not insured by NDIC. If they go down, everybody is on their own," he said.
He also lamented the activities of some of the companies trading in cryptocurrencies against the CBN directives.
"The regulators must act fast," Mr Fasua warned, while giving conditional support for the CBN's action against the six firms whose accounts were restricted.
"Seriously speaking," he said, "if CBN can prove the basis for the action it has taken, I think regulators should be allowed to regulate. I am in support of this based on more evidence that shows that the
Shina Memud, a tech and marketing enthusiast, said fintech space being an innovation-driven system has a lot of opportunities and must be supported by the government.
He urged the Nigerian government to "see it as a new form of business opportunity to tap into" by supporting the players which he assured would help in creating job opportunities.
"If any startup or business is committing criminal activities then they should be prosecuted accordingly," Mr Memud added.
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