I think this is an important angle to bring to the fintech innovation (vs) regulation discourse. https://businessday.ng/columnist/article/innovation-always-precedes-regulati... ‘Innovation always precedes regulation’ – A tech myth that needs busting David HundeyinAug 1, 2022 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 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.