Tech Firm Weighs In With A Solution As RBZ /Ecocash Fight Reaches Crescendo
by Guest AuthorTech Firm Weighs In With A Solution | Terence Zimwara
An African start-up, FlexFinTx has pledged a solution that can potentially end the tension between financial regulators and the regulated entities.
Known as Flex ID, the solution harnesses a technology known as self-sovereign digital identities to overcome the challenge of double identities or stolen identities. FlexFinTx is touting this solution in the wake of Reserve Bank of Zimbabwe’s (RBZ) fight with Ecocash, the country’s largest mobile money company.
The RBZ issued a directive to Ecocash to shut down some of the latter’s agents for allegedly flouting certain regulations relating know your customer (KYC) processes.
Ecocash responded by lodging a complaint with the High Court against a demand by RBZ forcing it to shut down of agents that engaged in alleged money laundering and illegal foreign currency activities. The RBZ also wants Ecocash to comply with an order to resubmit KYCs for some of its agents.
The High Court ruled against Ecocash stating it could not lodge this complaint on behalf of its agents. Specifically, the judgment states that the court cannot be used to interdict a lawful act by the RBZ.
Consequently, both Ecocash and its agents must now comply with the directives issued by the Financial Intelligence Unit, a division within the RBZ. FlexFinTx wants all parties concerned to know there is a less costly solution.
The advent of digital identities
In a statement, FlexFinTx states that with its self-sovereign identities technology, the solution to the Ecocash/RBX saga lays in the use Verifiable Credentials (VCs), whose issuers can be traced back and are trusted, with virtually no room for falsification.
Explaining how the system works, FlexFinTx Co-Founder and CEO, Victor Mapunga states the following:
“A FlexID is a Digital Identity Wallet that stores these Verifiable Credentials (VC) as issued by trusted authorities i.e. only organizations in our network can issue a credential. By knowing (1)the issuing organization (2) the holder/ receiver of the credentials and (3) the data contained in the credentials, organizations such as banks and mobile network operators (MNO) can leverage the Flex Network to verify the authenticity of users in their ecosystem.
The Flex ID nullifies the gamification of the KYC process as one cannot simply spin up a false ID or false company registration documents as a cryptographically signed signature by an Issuer would be required for such registrations.”
FlexFinTx’s solution is powered by the Algorand Blockchain, the highly scalable and decentralized platform that uses the proof of stake consensus. When data is stored on a decentralized blockchain it cannot be altered or tampered with. This is something that might assuage regulators like the RBZ.
If Ecocash or any other regulated entities that are required by law do regular KYCs, decide to use verifiable credentials for this process, then a nasty falling out as the one currently unfolding in Zimbabwe can be avoided.
In general, regulated entities like Ecocash might not have an incentive to do proper KYC because that is not their main objective. Companies want to make money so they will only grudgingly adhere to the KYC regulations but results in things like ghost accounts and identity fraud.
RBZ fighting to clear Zimbabwe’s name
On the other hand, RBZ has a greater incentive in having a financial services industry that adheres to global standards. The recent flagging of the country along with four other African countries by Financial Action Task Force (FATF) has only emboldened RBZ’s resolve.
So to show it is working hard to correct any anomalies identified by FATF, the RBZ might make impossible demands as is being alleged by Ecocash supporters.
In fact, RBZ’s hard-line stance against Ecocash is not without precedent. In 2015, regulators in Nigeria slapped MTN with a record fine of $5.2 billion (although this was eventually reduced to $1.6 billion) after the latter failed to register 5.2 million SIM cards. The Nigerian government justified its action at the time arguing that the terrorist organizations like Boko Haram were using such unregistered SIM cards!
FlexFinTx argues a solution like its Flex Network, a multisided platform which includes issuers, holders, and verifiers of Verifiable Credentials, can overcome the challenges highlighted above.
Issuers are organizations like the governments which issue out digital credentials. Holders are people that get issued with the digital credentials. While verifiers are organizations charged with the task of verification. For instance, a bank will do a KYC on a government-issued national ID.
Verifiable Credentials are stored securely on a holder’s device, they never leave the device, and FlexFinTx will not have access to them. The only organizations that have full access to the credentials are the issuers and the holder.
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