A major African central bank has encouraged customers to be careful when dealing in cryptocurrencies after a spate of forex fraud cases were reported.
The Central Bank of Kenya, which is responsible for lots of aspects of the country’s financial system, told consumers that they must check the status of any dealers with whom they interact, otherwise they risk losing their capital.
It warned that some unscrupulous dealers might say that the deal on the table is the best in its class, but actually be offering a worse deal than what could be available elsewhere.
As is the case around the world, forex fraudsters in Kenya are using technology to advance their aims, such as posting on social media or sending out mass emails to potential victims.
In a problem that is chronic in African economies, dealers who are not licensed are continuing to operate on the ground.
Large advertisements have been placed in newspapers in the country warning people of problems.
In a statement, the bank said that customers were responsible for looking up the license levels of any potential forex trading partner on the Central Bank of Kenya’s website.
“We urge members of the public to confirm the licensing status of forex dealers from CBK website before engaging with the dealers, as they risk being defrauded and losing money”, it said.
“The attention of CBK has been drawn to the unlicensed and unregulated online forex dealers and platforms that put Kenyans at risk of losing their money”, it added.
In a sign of the level of uptake of technology in developing economies, it specifically referenced the technical aspect of these crimes.
“The platforms are downloadable on Google Play and Apple App store, and aggressively market themselves through social media and mass emails”, it said.
Foreign exchange fraud comes with its own set of problems in Africa.
Many African economies suffer from high levels of inflation, and this can cause consumers to look for foreign banknotes.
Across the continent, currencies such as the US dollar are often used in black market transactions – meaning that the potential to exploit people who are desperate to get their hands-on foreign currency is high.
Attempts to regulate this have been instituted, and organisations such as the Central Bank of Kenya have tried to create proper, structured markets which require investment. However, these attempts to keep the market properly regulated appear to have potentially backfired. According to Kenyan media, it costs around 20,000 shillings to obtain a license to offer forex.
This is just an application cost too, and it is not refundable in the event that the application is turned down.
This figure is equivalent to just over £150 British pounds or almost $200 US dollars.
Applying to retain a license which has already been issued costs half of that too.
With policies such as this in place, many Kenyan forex dealers choose to enter the black market, meaning that fraud is on the rise, and that consumers in the country are even more at risk.