Criticisms as Uganda orders ID verification for digital financial transactions of $260 and above

A recent directive by the Bank of Uganda (BoU) for all digital financial transactions of one million Ugandan shilling ($260) and above to be completed upon the presentation of a government-issued ID document has sparked diverse reactions.

Critics say the move announced this month by the country’s central bank will bring about several challenges and slow down business given that many citizens in the country do not have ID cards.

On Aril 19, the BoU announced in a message on its X account that following a surge in digital payments fraud, it was forced to compel authorized operators to comply with certain regulatory requirements.

“Mobile money systems have occasionally been the target of cybercrime carried out by agents working with criminals,” a part of the message reads.

It said in compliance with Section 55(1)b of the National Payments Systems Act, 2020, and Regulation 7 (h) of the National Payment Systems (Agents) Regulations, 2021, all financial transactions involving Ugx. 1,000,000 [$260] or more that are carried out at authorized agent locations and operator centers on digital financial service platforms must be completed after the holder’s identity has been verified.

The verification, the BoU mentioned, has to be done using a valid national ID card or a passport for Ugandans, a refugee ID/attestation letter, or an alien ID for foreigners living in the East African country.

Local outlet Nile Post reports that while the move has been appreciated by some citizens as one of the ways of curbing the increasing rate of digital money fraud, others fear it would open up a window for new problems especially for those who do not have any of those government-issued identity documents.

A cybersecurity expert quoted by the outlet fears the directive could also lead to “a risk of forgery with national ID cards.” This fear aligns with findings of a Smile ID report released early this year which indicate that fraudsters seeking access to financial services usually try to bypass onboarding protocols using compromised government-issued IDs which are the cornerstone of ID verification in most digital transactions.

Uganda is planning to begin mass citizen enrollment for new generation biometric national ID cards from June.

Article Topics

Africa  |  financial crime  |  identity verification  |  mobile banking  |  national ID  |  Uganda