The news:
- Following a High Court ruling on February 1, Flutterwave, a Nigerian-based fintech startup, has been issued a Mareva injunction, or a freezing order, authorising it to begin the process of recovering ₦19 billion ($24 million) lost via unauthorised transactions by point of sale (PoS) merchants on its online platform.
- The court order lets the fintech company attempt to recover the funds and assets of the identified account holders, who may or may not have withdrawn the funds received in October 2023.
- This recovery process will see the fintech unicorn reach out to over 6,000 account holders across 35 banks and other financial institutions.
Flutterwave said it discovered, on October 10, 2023, that several PoS device merchants had abused their access by performing illegal transfers on its platform due to a "technical glitch."
In response to unauthorised transactions, the Nigerian-born payment service provider temporarily suspended accounts where funds were illegally transferred.
The company claims that no customer funds have ever been lost and assures the public that it is actively working with relevant authorities to conduct a thorough investigation and resolve the issue.
Court documents show that the fintech had secured an earlier court order, which imposed debit restrictions on the affected accounts two months after the incident.
The new court order received on February 1, 2024, compels 35 financial institutions, including commercial banks like Access Bank, Zenith Bank, PolarisBank, and Providus Bank, as well as digital operators like Opay, Moniepoint, Paga, Palmpay, and VFD Bank, to share the email addresses and mobile phone numbers of the account holders.
Per the directives of the court document, Flutterwave is to send email, SMS, and WhatsApp messages to the provided contact details.
The accuracy of customer information provided by named banks and financial institutions will play a significant role in the success of this court-ordered recovery, underscoring the importance of the Know Your Customer (KYC) provision.
In December, the Central Bank of Nigeria (CBN) announced a more stringent KYC regulation, directing all banks, mobile money operators, and financial institutions to insist on a Bank Verification Number (BVN) and National Identity Number (NIN) for all accounts or wallets.
Experts insist that the current KYC measure still leaves more to be desired, citing that it doesn’t mandate customers to inform their banks of any change in addresses, emails or phone numbers.
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This Flutterwave saga is also happening at a time in Nigeria where there’s a significant increase in fraud attempts in the country’s financial services sector.
Blaming neobanks for their lax anti-fraud and customer verification standards, some Nigerian legacy banks are exploring the option of blocking them from accessing their services. Fidelity Bank restricted transfers to these digital financial institutions for two weeks in October 2023.
