Somali people who are already struggling with the health and economic impact of the COVID-19 pandemic, are also distressed by another pandemic of mobile money scams, making the country’s largest financial service distrustful. Mobile money is the primary access point to financial services in Somalia with transactions worth about $2.7 billion a month according to the World Bank Report 2018.
Mobile money service are widely used and 73 percent of the population over the age of 16 use mobile money services as estimated by the World Bank Report in 2017. Taking advantage of this, the remittance companies are increasingly partnering with mobile money operators to transfer funds directly to recipients’ mobile money accounts, facilitating further the vast remittance flows which are critical to most Somali households.
The use of mobile money and its transactions boomed more than ever during COVID-19 pandemic and even humanitarian agencies increasingly favoured mobile money services for assisting the most vulnerable people in rural and remote areas of the country. While mobile money services are massively praised during the lockdown, something look like to be organized scams have troubled the users.
As matter take on social media pervasively, there is no official figures showing the scale and how much money lost to scams, but preliminary data shows an increase of mobile money scams from March 2020 when the COVID-19 emergency started. One of the three largest mobile money operators recorded more than 16,000 mobile money scams in a month and the informative officials even believe the figure to be far greater than this and that the trend is twice higher than before the COVID-19 emergency started.
Mobile money scams come in many forms and scammers have been using different tactics to trick and fall innocent victims into their trap, the most known tactics are detailed below.
Fake mobile money transfer transactions
Scammers increasingly used to send a fake mobile money transfer notification to the victims which looks like to be the ordinary one to trick unsuspecting victims. As soon as scammers send such fake notifications to the victim’s mobile number, they call the victim saying they just transferred money by mistake and that was meant for sick mother in the hospital or other fabricated emergency matter. Although the mobile money services have unique transaction ID and the sum up of the new balance are to be the previous balance and the new amount received, scammers pressure the victim with endless calling to hold off a chance to make an authenticity check.
Badri Kozar, a prominent journalist based in Hargeisa posted on his Facebook page a story of a victim of a mobile money scam in Hargeisa where the scammer sent a fake mobile money transaction notification to the victim showing that the victim received $100 and his balance is $486. Immediately after receiving the fake notification, the victim received a call from a man claiming that he sent $100 by mistake and requesting to return $90 and keep the remaining as reward. Kozar and the victim both alerted the public about the scams.
This tactic remained the scammers’ biggest approach to trick innocent people, mainly targeting the business people or individuals who are super busy or unable to make an authenticity check when they come across in such situations. Nearly 69 percent of Somali mobile money users have experienced such scams according to a recent survey of more than 3,200 persons by Bareedo Platform Somalia. The survey also shows that women in business who are mainly financially illiterate and dominating the country’s Small and Medium Enterprises (SMEs) to be the hardest hit groups.
Impersonating public figures
Scammers also used to call the victim pretending to a someone the victim knows well and likely to trust, and telling that they are in an emergency situation such as in hospital or airport and need an urgent sum of money. This kind of masquerade scams led many innocent victims to fall into a trap and lose a lot of money to scammers who are increasingly employing sophisticated and persuasive means to try and get what they want from these unsuspecting victims.
This tactic devastated friends and relatives of some popular public figures and many of them such as members of parliament, religious figures, Police officers, and businessmen who were impersonated by the scammers, have come forward alerting friends and relatives to be aware of the scammers using their names to steal money from friends and relatives.
Dr. Sh. Ahmed Nuur, a religious scholar alerted the public about scammers who have been impersonating well-known local religious figures to scam innocent people taking advantage of the love and respect people have with their religious figures. Dr. Nuur told the public that these scammers have already scammed a large number of innocent people including students, teachers, and management of some popular religious teaching schools and colleges in Somalia.
Impersonating aid agencies
The internally displaced and vulnerable rural communities who are dependent on aid in different parts of Somalia are also hit and targeted by the scammers. Scammers call innocent victims pretending to be from aid agencies well-known by the victims and then asking for registration and facilitation fees. These kinds of scams existed years insignificantly, but re-emerged recently taking advantage of the widely adopted mobile money cash distributions as the safest and quickest way of reaching and assisting the vulnerable people in the rural and insecure areas of the country.
For the latest instances, National Commission for Refugees & IDPs ( NCRI) of Federal Government of Somalia issued a public alert on February 24, 2021, urging residents of Mogadishu to beware of a recently uncovered scammers defrauding the displaced people in Mogadishu.
Not only NCRI, but several other governmental agencies in different parts of the country have also issued similar alerts.
As the country is facing severe humanitarian crises and political instability now followed by the COVID-19 crisis, mobile money service is becoming more important than before for the starving people in the country. Mobile money service is also a safer way to support the most vulnerable people in rural areas, especially now during the COVID-19 pandemic according to the FAO Somalia, saying they have transferred USD 15.4 million to 429,300 people safely from mid-March when the COVID-19 emergency started in Somalia.
Impersonating utility companies
Although this is not prevalent compared to those mentioned above, but scammers defrauded innocent victims by pretending to be a bill collectors from the local utility company. Scammers call the innocent victims by asking them to pay owed bills to their mobiles or will cut the service. These fraudulent activities particularly affected the utility companies still dependent on individuals for collection of bills from the clients.
ENEE, a public grid company in Bosaso is one of the utilities companies impersonated by scammers and defrauded innocent people in Bosaso. After such fraudulent activities reported by the clients, ENEE issued a public alert informing the public about imposters and to be aware of such scams and ask IDs if approached or called.
Why mobile money scams are on the rise?
The mobile money scams are facilitated by the following factors:-
- The mobile money services exist and continue to grow without any regulatory framework, making the system a fragile. For this reason, there is no even a set of procedures or individual identification systems required when opening the service from the telecommunication operators, who are absolutely responsible and run the service with vast sums in circulation without sufficient oversight and control of the concerned government authorities.
- Limited public awareness rising about the scams lead the unsuspecting users to be less vigilant and in some instances, they are not aware of reporting procedures. In addition to that, some users also blame the mobile money service providers for practices that does not offer sufficient guarantees to them, slowness and limited punitive actions against scammers when informed about scam transaction and requested to reverse it.
- The mobile money operators concentrate more on competition than setting up sufficient mitigatory controls to prevent these fraudulent activities from happening.
- Limited collaboration between the service providers and law enforcement institution followed by lack of resources and training of law enforcement are also another factor holding off prosecution of scammers.
- The mobile money service providers are reluctant to disclose scam data, fearing of loss of reputation and trust. This makes the matter undisguised despite of the mounting outrageous stories widely circulated and debated across the social media networks.
What can be done?
The scammers will continue to grow taking advantage of the expanding mobile money market and absence of regulation both in relation to mobile money services and associated risks. Furthermore, these fraudulent activities not only threat to the mobile money market, but may add a significant threat to the country’s fragile security and stability if not addressed as soon as possible. While further studies and dialogues are open and needed to find concrete and sustainable way forward, the following solutions are helpful for the time being:-
- Adoption of regulatory framework is urgently needed to maintain the security, reliability and sustainability of the industry. Similarly, the third Somalia Economic Update published by the World Bank provides concrete recommendations on introducing mobile money regulation that can boost a secure system for widespread financial inclusion.
- The law enforcement institutions need to get the capacity and resources necessary for monitoring and investigating scam and fraud activities to bring criminals to the justice.
- The mobile money providers and other users of their platforms, including banks and remittances need to implement mitigatory controls in adherence of financial and user security requirements. The GSMA’s Managing the Risk of Fraud in Mobile can be a helpful to any risk management strategy in mobile money, when combined with the ground facts.
- The mobile money service providers and law enforcement agencies also need to form a close collaboration to prevent the scam and fraud activities.
- The law enforcement institutions, mobile money providers, users of their platforms such as banks, utility companies and humanitarian agencies need to undertake continued public awareness raising and teaching their clients about the scams and how and where they can report to.