Nigerian Fintech Executives owners of United States-based fintech company, Ping Express have been convicted after breaching money laundering rules in which they have sent $160 million to Nigeria unchecked over the past 3 years.
According to the US legal filings, the executives Anslem Oshionebo (45), and Opeyemi Odeyale (43) have received a 27-month prison sentence for their failure to maintain effective anti-money laundering controls and transmitting money without them being licensed.
Ping Express US LLC faces 5-year probation and an additional $500,000 as a fine after it pleaded guilty to a similar charge, A top executive in the corporation also received a 42-month sentence on a similar charge.
The company has been accused of sending over $167 million to Africa over the past 3 years and $160 million from the money was transmitted illegally to Nigeria. The company sent customers’ remittances to various African Countries namely Nigeria, Kenya, etc. and in one 3-year period, it failed to provide proof that one transaction was legitimate despite it claiming that it processes a “significant amount” of them, though it filed a batch of reports later.
Fraud Ping Express Has Been Accused of Committing
i) A customer used the platform to conduct a fake-romance fraud in which they claimed the personality of a roughneck oil worker based in the Gulf of Mexico to defraud a woman of $15,000.
ii) Another customer used the platform to dupe a person of $6,300 after claiming the personality of a purported Irish Sea captain.
iii) The company according to its policy has a move-out limit of $4,500 but the company’s platform was also used to move out over $60,000 in a single month without the company putting a sanction on the customer.
One of the accused, Opeyemi Odeyale, founded a London-based payment company- Payzen Ltd, which was approved by the UK Financial Conduct Authority to operate in January 2020 and he only lasted as the CEO of that company till December 2020 when he was removed due to the accusation laid against him by the Northern District of Texas but the London-based company wasn’t involved in the case.
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In a LinkedIn message, Adedire stated that Payzen Ltd is a different entity from Ping Express and is not related to the ongoing case.
Risks associated with the Fintech industry
1) Cybersecurity Vulnerabilities:
One of the major risks associated with using Fintech apps is that most of them are targets of hacks and cyberattacks. The main reason hackers are attracted to fintech apps and the fintech industry, in general, is because it deals with:
i) Sensitive information: This contains details such as Bank details, Transaction pins, and Bank card details which can be used to infiltrate a person’s bank account anytime.
ii) Money: Hackers know that stand to gain a lot when they have fintech apps because they are online banks which means that they are guaranteed of carting away millions of dollars and lots more.
Today, Bank heists are now becoming very popular online as cyberattacks on the fintech industry have increased by 238% from February to April 2020 according to VMWare. The most popular hacks used by hackers are Ransomware and Social engineering.
ii) Ransomware: This is a type of malware that when injected into a system keeps the users from gaining access to sensitive files or encrypts sensitive files which can be opened only by a passcode that is known only to the hacker who requests for a fee before he/she reveals it to the victim.
This is the most common means of cyberattacks on the Fintech industry as over 90% of financial institutions were attacked by ransomware in 2017 and Finastra, the world’s 3rd largest fintech firm was also targeted with a ransomware attack.
iii) Social engineering: This is popularly known as Phishing; this is a method of manipulating users to reveal their passwords, granting admin access to hackers.
This kind of hacking takes time because you will have to gain the trust of the victim before he/she grants you your request but when done successfully it can bring in a lot of power and can even provide you access to very sensitive and important files.
This kind of hack can be an inside job as there was a situation when Postbank employees stole over $3 million after gaining access to the bank’s master key. This form of hacking may come through an email or fake phone call.
2) Fraud and Money Laundering:
Fraud and money laundering have been a major problem in all sectors/industries in general but in the Fintech industry, the chances of this vice happening are magnified because most fintech employees are unknown to the public which makes them too commit financial crimes without being identified by the public and authorities.
The masterminds of these operations are known to disburse the money to various bank accounts with various names after stealing it hence making it difficult for the authorities to identify which deposits were done by the criminals because they deposit in small cash which seems normal to the authorities.
The ability to open multiple bank accounts in traditional banks may seem to be very strict and challenging but this process is simplified in the fintech industry making it possible for criminals to various bank accounts with ease.
These criminals now use cryptocurrencies like bitcoin and Ethereum due to the anonymity offered by these platforms making it difficult for the authorities to trace such transactions.
When various money laundering cases are filed against a particular fintech industry, it lessens the trust the customer has on such platforms which leads to lesser income and then bankruptcy.
The biggest Fintech failures due to bank fraud are:
i) The 2020 Fraud conducted in Wirecard in which over $4 billion was stolen by the CEO and other executives
ii) A Bitcoin website, Coin Ninja, had its CEO arrested after he stole over 354,468 BTC which was worth $311 million as of 2017.