Last week, allegations emerged that Econet was automatically registering subscribers to its EcoCash mobile money service. The official Econet response to the allegations was a failed spin that tried to deny allegations, only stating that it was against company policy to do that. However, the official Econet Twitter account confirmed the allegations in response to a customer query over being auto registered to EcoCash.
Company policy aside, it turns out the alleged action by Econet may also be against national financial regulations and the Reserve Bank of Zimbabwe (RBZ), the regulator in this area, is currently investigating these allegations.
A source in the industry told us today that the Reserve Bank’s National Payments System division is currently investigating Econet over these allegations. It is believed that the Reserve Bank may have been tipped off by Econet’s key rival in mobile money, Telecel.
By auto-registering clients to EcoCash, Econet is alleged to have been in violation of provisions of the Money Laundering and Proceeds of Crime, Chapter 9:24 as revised at the 4 October, 2013. We looked at this Act and it’s apparent that, if the allegations are true, Econet may have been in breech of Chapter 3, Part 1 of the act which deals with customer identification requirements.
Here what it says, among other things (pay particular attention to (a) and (d)):
15 Customer identification requirements
(1) Subject to the special identification requirements of subsection (2), every financial institution and designated non-financial business or profession shall identify every one of their customers and verify a customers a customer’s identity by means of an identity document, when —
(a) opening an account for or otherwise establishing a business relationship with a customer or
(b) the customer. who is neither an account holder nor in an established business relationship with the financial institution, wishes to carry out a transaction in an amount equal to or exceeding five thousand United States dollars (or such lesser or greater amount as may be prescribed, either generally or in relation to any class of financial institution), whether conducted as a single transaction that appear to be linked:
Provided that if the amount of the transaction is unknown at the time it is commenced, the customer’s identification shall be verified as soon as the amount of the transaction has reached the prescribed amount; oe
(c) the customer, whether or not he or she is in an established business relationship with the financial institution, wished to carry out a domestic or international wire transfer of monetary amounts in the amount equal to or exceeding one thousand united states dollars (or such lesser or greater amount as may be prescribed, either generally or in relation to any of financial institution); or
(d) doubts exist about the veracity or adequacy of previously obtained identity documents, or
Section 18 of Chapter 3, part 1 deals with Reliance on customer identification by third parties and says among other things:
(1) Financial institutions and designated non-financial business or professions may rely on intermediaries or other third-parties to perform customer identifications as required by section 15, if —
(a) there is no suspicion of money laundering or the financing of terrorism; and
(b) information on the identity of each customer and beneficial owner is provided immediately on opening of the account or commencement of the business relationship; and
(c) the financial institution or designated non-financial business or profession is satisfied that the third party —
(i) is able to provide without delay copies of the relevant identity document and other documents relating to the obligation f due diligence upon request; and
(ii) is established, domiciled or ordinarily reside in a compliant jurisdiction.
In this case, and if the allegations of auto-registering customer to EcoCash are true, Econet may have failed to obtain the relevant identity documents of the auto registered clients which would violate statutes of the above regulations.
Section 23 deals with penalties for failure to comply with these identification regulations. It reads:
Any person who intentionally or by gross negligence fails too undertake the identification of any customer or otherwise to fulfill the customer identification and risk management requirements in accordance with section 15 shall be guilty of an offense and liable to a fine not exceeding level ten or to imprisonment for a period not exceeding three years, or both such fine and imprisonment.
We are not 100% sure if the Reserve Bank is investigating the matter along these same lines. Efforts to get a comment from them has been difficult probably because of the sensitive nature of the issue. They however said a response to our questions is “forthcoming, if it is coming”.
We also could not reach Econet for a comment as their PR person’s mobile went unanswered.
Frode Iversen
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11 comments
this is great, i really want to see these arrogant econet clowns get a whipping!!
also, while you are at at it, please stop econet sending spam sms’s to their own subscribers. they sms way too much garbarge on a daily basis. please potraz stop these money-hungry arrogant econet spam clowns!!!!
Its always good to see a bully cut down to size, but they are not the only ones who spam. Telecel also send out sms – and worse still, Telecel does robocalls – the ultimate violation. Econet has never sent me a robocall even once, but Telecel has done it SEVERAL times: for TELETUNES of all things. Absolutely no excuse for that!!!
Telecel launched two years before econet in 96 who got a real whipping here over the last 16 years. Skwama launched and abandoned before econet. They back now and they cry babies rushing to regulator. If u hide behind regulator in business your strategy is questionable. They don’t have a strategy but just lobbying via Gvt all the time. Telecel has not paid their licence fees I don’t trust they have the 129mil now sitting on their balance sheet. Musangomaka econet zvisina dhiri supporting unlicensed companies by breaking the laws. Ichavharwa kana kubroker telecel Maisa Mari dZenyu. With changes in technology would like to see how small players such as telecel will survive.
Zvinonyadzisa to think that a BIG player like Econet would resort to underhanded ways to boost following for their flagship product. Perhaps they should have approached the regulator with the logic that all subscribers have been identified through POTRAZ registration.(Re Article 15 :1 a and b)In any case its not difficult to design an application that presents an option to register to every subscriber (something USSD based or any other VAS conduit) That would definitely dismiss the need for this Cloak-and Dagger approach to something so simple
Bigger players like Mpesa are doing it nothing new here. It’s like u invest in a girl can u just let another dude come and get the girl for mahara. If u had a business u would understand. Read what gapped to Pepsi!
I am not a lawyer, but didn’t the subscriber-registration mandated by POTRAZ require that operators get ID particulars of all subscribers? As such, I’d imagine Econet satisfies the ID requirements.
What is more contentious is the definition on when a “business relationship” is established: is it when you buy a SIM card & sign an agreement with Econet, or is it when you open an Ecocash account?
That was my understanding too. Seems identities are collected when a business relationship is established. It would have been different if the KYC was not in place already.
this is getting very interesting, when i called their call centre after i had received a message that i had been registered on their eco cash platform, they informed me that it was a technical problem, and i just wondered how convenient the so called “technical problem” is, coming soon after the tele-cash launch
In Kenya Mpesa the most successful mobile money platform has fought and refused to share their agency network with other players. I wonder why telecel cannot go and start their own agency network. What people need to understand is setting up an agency network comes at a cost. It’s unfortunate that being a first mover can create challenges for companies in the future. The people who will lose in this case are agents if they are not smart! I don’t understand why even the RBZ is rushing to influence market forces here. If a business offers agents float and extra service do they not deserve exclusivity agreement. This is a business decision between two parties and now the RBZ is being biased here. I smell a rat here.
I think the market as a whole will benefit if agents are not restricted to only one service. Ofcourse it will mean Telecash will have to do less effort in establishing an Agent network. But it is convenient for users to have all three services under one roof.
Econet shld focus on out competing Telecash instead.
Telecel wants to benefit from the work of Econet. Let them start their own Agent network kwete kungoda kurarama nezvevamwe.