Kenya: Safaricom Cancels 27 Contracts Over Fraud

Mergers, Acquisitions and Financial Results

Listed mobile service provider Safaricom has terminated its contracts with at least 27 dealers over alleged fraud.

The company announced the decision  lastTuesday to allow for investigations into a suspected fake bank documents racket that is believed to have cost it millions of shillings in lost revenue.

"This means that these businesses can no longer act as Safaricom dealers or enjoy the rights and privileges that this status bestows," Safaricom's director of corporate affairs, Mr Nzioka Waita, said.

According to available information, the fraud involves a dealer presenting fake bank document, normally a bank deposit slip, to a Safaricom shop.

The dealer or his agent then proceeds to collect goods, normally airtime, equivalent to the value of the money allegedly deposited into the Safaricom bank account, as recorded on the slip. It is through this scam that the company is estimated to have lost millions of shillings.

Dealers ordinarily collect goods from Safaricom shops under an agreement that allows them to use bank slips. The arrangement -- of depositing bank slip, the firm has previously said -- is meant to reduce the amount of cash handled by its retail shops.

"Initial investigations show a distinct variance between money claimed to have been deposited into the account and actual account status.

"The upshot is that some dealers may have been collecting goods for which no money had been paid," noted Mr Waita

In what could be seen as efforts by the firm to rein in the fraudsters, last week an advocate and a city businessman were charged in Nairobi with possession of forged documents and intention to defraud Safaricom.

As the leading player in the industry, the firm has enlisted the services of about 400 companies to run outlets throughout the country.