[kictanet] ‘Innovation always precedes regulation’ - A tech myth that needs busting

Wed Aug 3 12:01:24 EAT 2022

Hi Nanjira,

This is very timely. Reminds me of the pyramid schemes and i won't name
names'. I guess we need to think of how to incubate and promote local
innovations within supportive regulator frameworks as opposed to having a
free for all regime. Reading the article, i can only imagine the effect of
''wash wash''.

Regards

On Wed, Aug 3, 2022 at 9:36 AM Nanjira Sambuli via KICTANet <
kictanet at lists.kictanet.or.ke> wrote:

> I think this is an important angle to bring to the fintech innovation (vs)
> regulation discourse.
>
> https://businessday.ng/columnist/article/innovation-always-precedes-regulation-a-tech-myth-that-needs-busting/
>
> ‘Innovation always precedes regulation’ – A tech myth that needs busting
> David Hundeyin <https://businessday.ng/author/hundeyin/>*Aug 1, 2022*
> [image: Fintech]
> <https://i0.wp.com/businessday.ng/wp-content/uploads/2022/07/Fintech.jpg?fit=700%2C400&ssl=1>
> Fintech
>
> One of last week’s biggest stories out of Africa was the Kenyan central
> bank’s decision to effectively blacklist Flutterwave and Chipper Cash from
> operating in Kenya. Typically, much of the reaction to the story from
> Nigeria managed to completely sidestep the material facts of the case and
> turn it into an African macrocosm of Nigeria’s usual ethno-tribal discourse.
>
> Flutterwave, according to the narrative, was merely being unfairly
> targeted because it is a successful Nigerian company operating in Kenya.
> The “jealous” Kenyan authorities were simply acting as proxies for
> Flutterwave’s Kenyan competitors who wanted to protect their market share
> from “de Najeeryans.” When the point was raised that Flutterwave was, in
> fact, operating illegally in Kenya, in addition to being in clear violation
> of Anti Money Laundering regulations, the reply that came was, “Obtaining a
> Kenyan licence is hard. Innovation always precedes regulation.”
>
> I have written previously about how there exists a dangerous narrative in
> Nigerian tech – Fintech especially – that rules are secondary
> considerations that tech is somehow exempt from. Now, it is time to
> critically analyse this idea so that if it turns out to lack merit, perhaps
> we can start the process of killing it dead once and for all. Here goes.
> “Tech is special” – says who?
>
> Earlier in the year, I was approached for a private investigation
> engagement focusing on an investment scheme promoter who had made away with
> billions of naira worth of client money. Having registered his investment
> scheme with the Corporate Affairs Commission, he managed to convince
> investors that having CAC registration somehow had anything to do with
> being licensed to offer investment or crowdfunding services in Nigeria.
> Meanwhile, as anyone with the slightest regulatory awareness knows, only
> the Securities and Exchange Commission (SEC) has the ability to license
> investment companies.
>
> Unsurprisingly after he disappeared into the night with hundreds of
> people’s money, there was no way to do anything to him. Because the company
> had no SEC registration, the commission had nothing to freeze, revoke or
> investigate. It wasn’t even interested, which is why I was approached. At
> the point when I was approached, every informed reaction I came across
> treated the matter as a lesson in the importance of due diligence and
> making sure that investment schemes have the appropriate regulatory
> compliance before putting money into them.
>
> Nobody made the fatuous argument that perhaps the scheme started off
> legitimately, and the promoters just needed to get it off the ground first
> before worrying about SEC registration later. Instead, it was correctly
> recognised as fraudulent behaviour where other people’s money was involved.
>
> Just a few weeks later, however, when news emerged that GetEquity, a tech
> investment platform purporting to offer access to American stocks was doing
> exactly the same thing, plus the added illegality of an unrecognised,
> unenforceable “digital investment token,” the reaction was completely
> different.
>
> This time around, that fatuous argument was thrown around with such
> regularity that one might have almost begun thinking it was some kind of
> accepted wisdom. Apparently, when Maxwell Odum floats an investment scheme
> that has no SEC registration and fraudulently portrays CAC business name
> registration as “regulatory compliance,” he is correctly recognised as a
> fraudster who should be prosecuted.
>
> When Jude Dike does the EXACT same thing, but slaps a mobile app, a dot io
> website and a little tryhard tech PR branding on it, he is an “innovator,”
> a “striver” and a “disruptor” who “moves fast and breaks stuff.”
>
> When the story inevitably ends the same way, instead of having private
> investigators hired to tail his movements around the world, he will instead
> get to live in peace and security, undisturbed by anyone because apparently
> fraudulent behaviour is bad, but when you call it
> https://fraudulentbehaviour.io, it becomes something else. This giant
> mental black spot is the reason why tech is used to facilitate and abet
> different kinds of criminality in Africa without so much as an eyelid being
> raised.
> Once again, rules exist for a reason
>
> In my line of work, a truism that I often come across goes like this:
> “There is never only one cockroach.” What this statement means to
> investigators and auditors is that where one serious regulatory or cultural
> lapse can be observed in an organisation, there will almost certainly be
> other serious issues afflicting that organisation.
>
> In the case of Uber, the initial cockroach was the company’s studious
> refusal to cooperate with local laws around the world as it followed its
> “Always Be Hustling” internal motto, moving fast and breaking stuff until
> the things getting broken were no longer just rules.
>
> Read also: Nigerian fintechs grapple with KYC amid rapid growth
> <https://businessday.ng/technology/article/nigerian-fintechs-grapple-with-kyc-amid-rapid-growth/>
>
> First came the women who complained about sexual harassment by unvetted
> Uber drivers, and then came the more serious stuff. Rapes. Homicides.
> Deaths from traffic accidents caused by fatigued Uber drivers struggling
> desperately to maintain their near 5-star ratings so as to keep earning a
> living, while Uber used loss of ratings as grounds for account removal and
> potential loss of livelihood. All of these issues were avoidable if Uber
> had spent a few months working with authorities to ensure full compliance
> first, but “moving fast and breaking stuff” was more important.
>
> The story is much the same with Flutterwave, which not only began
> operating without a licence in Kenya, but then began actively and brazenly
> facilitating money laundering on its platform in the jurisdiction where it
> was already operating illegally.
>
> It is difficult to picture any other commercial space where such behaviour
> would not have resulted in conferment of societal pariah status. Can you
> imagine, say, a Nigerian construction company opening up illegally in Kenya
> and then deliberately using substandard construction materials resulting in
> Kenyans’ deaths?
>
> Would Nigerians feel moved to defend such a thing? Why then, do so many
> Nigerian techies feel obliged to defend Flutterwave and its money
> laundering activities in a country whose last major terror attack was
> planned and funded using electronic payment platforms?
>
> These are the questions that we must ask ourselves as we react to stories
> like that of Flutterwave. The rules exist for a reason – they are not
> impediments to the individual egos of people with behavioural disorders who
> think that they exist as protagonists in a videogame where they can do as
> they please.
>
> Perspective is a healthy thing.
>
>
>
> Regards,
> Nanjira.
>
> Sent on the move.
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