FinTech: Some Emerging Market Fintechs In Hot Water As Central Banks Crack The Whip

Fintechs in Kenya (Flutterwave, Chipper Cash) and Pakistan (Tag) have recently received regulatory heat from their respective central banks.

After a months-long investigation, the State Bank of Pakistan (SBP) has ordered Tag, one of the fastest growing startups in the country, to immediately refund all customer funds on grounds of “violations of SBP’s regulatory requirements and other concerns.”

In its letter to Tag, the SBP directed Tag “to refund all outstanding funds to its wallet holders immediately but no later than August 19, 2022.”

The bank said Tag was currently in a “pilot stage” of Electronic Money Institution (EMI) licensing process, at which point the regulator assesses the readiness of the fintech for commencing commercial operations.

A successful completion of the pilot stage qualifies the business to receive a license for commercial functioning.

Tech Crunch cited an investor letter issued by Tag co-founder Ahsan Khan that accused co-founder Talal Gondal of forging documents to the central bank – the alleged reason for the suspension of Tag.

Meanwhile, the Kenyan central bank has barred all the country’s financial institutions from doing business with fintech startups Chipper Cash and Flutterwave as neither was licensed to operate as a financial payments or remittance provider in the country.

“It has come to the attention of the Central Bank of Kenya (CBK) that Flutterwave Payments Technology Limited and Chipper Technologies Kenya (Chipper) have been engaging in money remittance and payments services without licensing and authorization by CBK,” highlighted supervision deputy director, Matu Mugo, in a letter.

“You are therefore directed to immediately cease and desist from dealing with Flutterwave and Chipper,” he added.

Last month, a court in Kenya froze more than $40 million in accounts belonging to Flutterwave under the country’s anti-money laundering laws.