Court gavel./FILE
The High Court has cleared the way for a landmark mobile money fraud lawsuit that could set precedent on the responsibility of telecommunications firms for losses arising from increasingly sophisticated scams.
This is after the High Court rejected an attempt by Safaricom and M-Pesa Holding Company to have a Sh125,658 claim thrown out before trial.
Justice J.W.W. Mong’are dismissed a preliminary objection by the two companies, ruling that the High Court has jurisdiction to hear the case.
The judge ruled that the plaintiff had exhausted the available complaint mechanism and that the dispute raises constitutional questions.
"Going through the rival arguments and authorities, I find that the plaintiff has a stronger jurisdictional and contextual argument," Justice Mongare said.
The case was filed by ADRA Advocates LLP on behalf of Paula Rogo.
Rogo has sued Safaricom and M-Pesa Holding Company on her own behalf and on behalf of M-Pesa account holders who have fallen victim to fraud.
The suit raises broader questions about consumer protection, access to information and the responsibilities of mobile money providers when customers lose funds to fraud.
Through her lawyer Pearlyne Omamo, Rogo argues that Safaricom markets M-Pesa services as secure but have continually failed to prevent unauthorised access of their customer information.
“… continually fail to assist and compensate victims of M-Pesa fraud and have failed to establish dedicated call centres and personnel to address instances of M-Pesa fraud in a responsive and timely manner is a violation of their consumer rights, “the suit states.
Rogo claims she was defrauded on January 3, 2024, after receiving a call from a man who identified himself as Michael Kiptoo, allegedly a Safaricom employee.
According to her court papers, the caller appeared convincing because he was able to provide details of her M-Pesa account, including her balance, recent transactions and two of her most frequent contacts.
The caller allegedly told her that another person had been assigned her telephone number and that he needed to verify and secure her account.
Rogo says she was then guided through a series of prompts involving M-Pesa's Pochi la Biashara service.
She was instructed to send what she believed was a test amount, with the fraudster telling her to include zeros before the amount.
She says she entered “00119658”, believing it was part of a verification process.
The transaction initially appeared unsuccessful, but after being instructed to repeat it, it went through.
It was only later that she realised Sh119,658 had been deducted from her account.
The caller then allegedly told her that her loans and savings accounts also needed to be secured.
Rogo obtained a Sh6,000 loan through M-Shwari and was instructed to send the money through the same process.
The total loss came to Sh125,658.
Rogo says she never disclosed her M-Pesa PIN and that the fraudster repeatedly warned her not to share it, which strengthened her belief that he was a genuine Safaricom employee.
When she realised she had been conned, Rogo says she immediately tried to reverse the transactions.
She contacted the M-Pesa reversal line, attempted to use Safaricom's WhatsApp platform and made nine calls to customer care before finally reaching an agent.
She says about 40 minutes elapsed before she was able to speak to a customer care representative.
The representative allegedly attempted to reverse the transaction but told her that the recipient had already withdrawn the money, making recovery impossible.
Rogo says she was advised to report the matter to the police.
Despite subsequent follow-ups, she claims she did not receive compensation, an update on investigations or information on whether the incident had been reported to the Data Commissioner.
She subsequently sued, arguing that Safaricom and M-Pesa Holding had failed to provide adequate mechanisms to prevent and respond to fraud.
She accuses the companies of violating her constitutional rights under Articles 35, 46 and 47, relating to access to information, consumer rights and fair administrative action.
She also alleges breaches of the National Payment Systems Regulations, including failure to resolve complaints within 30 days and failure to provide customers with adequate information on the progress and outcome of investigations.
Rogo is seeking Sh125,658 in compensation, general and punitive damages, as well as orders requiring the companies to establish dedicated fraud reporting teams, improve systems for detecting and preventing fraudulent transactions and compensate victims under transparent and timely procedures.
She also wants the companies to disclose fraud statistics and investigation statuses in their annual reports.
Safaricom, however, has denied liability.
The July 22 ruling did not determine whether Safaricom is ultimately liable for the loss. Instead, the court dealt with preliminary challenges to the case.
Safaricom and M-Pesa Holding had argued that Rogo should first pursue a dispute-resolution mechanism under the Kenya Information and Communications Act before approaching the High Court.
Justice Mong’are rejected that argument, noting that the Communications Authority itself had indicated it lacked jurisdiction over the financial-services aspects of the dispute.
The judge also found that Rogo had lodged her complaint with the defendants under the National Payment Systems Regulations but received no response. She was therefore entitled to seek further recourse in court.
The court consequently dismissed the preliminary objection, allowing the substantive dispute to proceed.
The ruling leaves the larger question for determination at trial: where a fraudster successfully impersonates a mobile-money provider's employee and uses information apparently linked to a customer's account to steal money, how far should the provider's responsibility extend?
