Exclusive: Risevest clarifies mass disabling of accounts, opens up on battle with round-tripping

As part of the realities of the online cancel culture, financial technology companies always have to deal with customers who prefer to call out service providers online rather than go through regular means designed for resolutions. A popular investment company, Risevest had to deal with a similar issue recently. A number of its customers thronged to social media to accuse the fintech company of seizing their funds and restricting their accounts on a whim.

This came in the wake of what Risevest Co-Founder and Head of Operations and Data Analytics, Anthony Odiba described to Technext as an “increase in unusual funding and withdrawal patterns among some accounts.”

A user, Cosmas spoke to Technext about his situation. According to Cosmas who hails from Benue State and studied at Ecole Superieure Sainte Felicite, (or the University of Saint Felicite) in Benin Republic, his Kenya-based brother sent him 1,000 dollars for his school clearance which would in turn enable him to go for National Youth Service.

“I asked my elder brother to send me money for my school fees. I am supposed to pay in November. So he said I should download Risevest and he would send the money over there. He said Risevest would add me extra money when I want to withdraw. So he sent $1000, I tried withdrawing but nothing dropped in my account. I later found out my account was disabled,” he said.

Cosmas’ situation isn’t very different from others who had taken their complaint to social media in the wake of the mass disabling of their accounts by Risevest. Ahmad Abu Tafyan for instance insists that the company was holding people’s funds for too long even though they have all the customers’ records.

When Cosmas reached out to the company, he was sent the following message: your account was disabled for receiving funds from a suspicious account. Please ask the sender to reach out to us.

“It’s really a shame on you guys and it shows how unreliable you guys are…why will you be holding up people too long for a refund when u have all your records intact? Please you guys should refund our funds please, you wanna make life and country harder for us,” – Ahmad Abu Tafyan said in a tweet directed at the company.

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Interestingly, Risevest was accused by a user of trading with the funds in his account while it was said to be blocked.

In the wake of the accusations, Risevest issued a statement explaining that withdrawals have been blocked to prevent roundtripping arbitrage detected by its fraud control system. The statement alludes to two possible instances of fraud.

The first is currency speculation. Some users’ withdrawals were disabled as a result of suspected instances of roundtripping- when a customer deposits funds when the local currency money exchanges to the dollar at a lower rate and plans to withdraw after an increase in the exchange rate. The problem with this is that Risevest is solely an investment and wealth management platform, not a savings or currency exchange platform.

The second situation is receiving funds from a suspicious account.

For those restricted for roundtripping, they were asked to request chargebacks after which they will be refunded through their banks and charged a processing fee of 1.2 per cent.

Risevest explains

The statement, however, appeared to pose more questions than answers. Speaking with Technext, Rise Co-Founder/ Head of Operations and Data Analytics, Anthony Odiba provided some clarifications.

According to him, there were a lot of account restrictions because many users were attempting to cheat the system using the card funding and withdrawal options.

While noting that users can either use the Naira or USD card funding options, he said:

“Some users noticed that they could use their Naira card on the USD card funding option, get their wallets funded at a lower rate, and then request for a withdrawal at Rise’s sell rate, which was higher than their funding rate at the time. I guess those users told their friends, who told their friends and in a short while we had a couple of users attempting to take advantage of this roundtripping avenue. We do not encourage roundtripping and we wouldn’t otherwise flag or restrict users’ accounts for normal behaviour.”

He explained that the platform’s Terms of Use clearly state that Rise should be used strictly for the purpose of investing in options available on the platform and not as a means to roundtrip FX rates.

This still doesn’t answer the question of how the company detects these fraudulent activities. Asked how exactly Rise decides if a transaction is fraudulent, Tony told us that the fraud check system flags suspicious accounts using various criteria.

These range from having multiple third-party credit cards linked to one account, having irregular funding patterns consistent with verified, historical fraudulent transaction patterns or receiving funds from other flagged accounts.

“A combination of these flags can lead to us disabling the affected account to investigate further. These accounts will not be reinstated if, at the conclusion of our internal investigations, they cannot show sufficient proof of legitimacy like IDs, utility bills, and ownership of the card used to fund Risevest, accounts” he said.

Issues with chargebacks

Anthony also indicated that in some specific instances of roundtripping, the accounts of defaulting users are being disabled because a refund has been issued or they have requested a chargeback through their card providers, which Rise has honoured.

But, to prevent the occurrence of double crediting of these accounts, the team temporarily disabled these accounts for account reconciliation purposes.

In the instance of chargebacks, users who had requested them through their card issuers (traditional banks) complained that they are yet to get their money back. Indeed some said they have applied to their banks but the banks are requesting a receipt of refund from Risevest. And that the wealth management company has refused to provide.

Mujaheed Yayari, for instance, explains his peculiar situation:

“They told me to request for chargeback from my bank for 3 particular transactions in the last three weeks. Now, I called my bank and they said the request was declined by the merchant. Plus, Risevest has blocked my account and no refund has been made.”

In response, Anthony admits that the process might take a bit longer than expected. He explained that the chargeback process is a little different because banks contact Rise through its payment processor, Flutterwave. As such, they have to wait for Flutterwave to automatically deduct funds from their account and issue the refund on their behalf.

Anthony added that the company has started sending receipts for refunds made to users’ bank accounts.

Way forward for flagged Risevest account holders

In a message sent to users whose accounts were suspected to have received the proceeds of fraudulent activities, Risevest asked them to ask the sender to contact the company.

It is quite unclear why the receiver was required to ask the sender to contact Risevest when both are Risevest’s customers and the transaction indeed took place on the platform. Surely, the company could identify the sender have access to them, and could easily contact them if they needed to.

Anthony explained that due to the severity of the problem, the team decided to concentrate on processing refunds to flagged accounts. This, he says, is the most crucial step in resolving user problems.

He said other users whose cases involved multiple wallet-to-wallet fund transfers were not given priority, primarily because some dishonest users have attempted to withdraw money, have failed and attempted to pass the money through the accounts of other users.

In such instances, the Risevest team usually reaches out to the original senders to inquire about the source of their funds, but they never respond.

“By requesting that the flagged recipients ask the senders to contact us, we can establish a relationship and verify their identity and intentions more effectively. It adds an additional layer of security and ensures that we are dealing with real users on our platform. In some cases, we have communicated to these users (i.e., senders) via email and have received no responses,” he said.

In the letter sent out to users, Risevest said it was going to refund them once their chargeback applications had been finalized. This typically takes between 5 to 15 business days according to the investment platform. It, however, says it will be charging 1.2 per cent for processing fee.

This raises the question if this is an exploitative move by the company seeing as the refunds wouldn’t have been necessary if it hadn’t disabled the accounts.

Anthony clarified that this was because the accounts were involved in roundtripping.

According to him, typically, the use case for Risevest’s product is to give users access to dollar-denominated investment opportunities. He said the platform is not against users who fund accounts and use them for the purpose But, in instances of roundtripping, there is a cost to moving money around apart from the operational challenge of sourcing FX for a large volume of users who only want to roundtrip.

In addition, the converted funds are wired out at a cost and the company has to wire the funds back to process refunds at a cost.

“In almost four years, we have borne this cost and this is the first time we have taken enforcement actions because the volume was higher than we could just absorb as a normal cost of doing business. In those four years, we have never had issues with our users. And despite our repeated warnings about roundtripping, we have seen some users continue to engage in such actions,” he added

He assured that this was more of a one-off event too.

Anthony said it is not uncommon for some users to intentionally use threats of reputational damage to cower companies by playing the victim. “And our work is to find real ways to filter legitimate user complaints from bad actors who tend to be the loudest”, he noted.

Going forward

What seems to be the case from Risevest’s point of view is that the company detected a considerable number of roundtripping on its platform and disabled those accounts. It also appears that in a bid to beat the system and still access their funds, some flagged users attempted to transfer funds from flagged accounts to other accounts on the platform. To prevent them from withdrawing successfully, the platform also restricted the receiving accounts as well.

This explains the outcry in the social media space. But, does this explain the circumstances of every affected user?

We went back to Cosmas to ask him one last time about the source and essence of the funds in his suspended account. And, he stood by his story and even showed me documents from his school to back his story.

“I have no fraud history that’s why I genuinely followed all the required processes. I have been mobilized and I’m waiting for this money to pay my outstanding fees so I can go for NYSC this November. I can’t afford to lose this money. I’m doing my best to get this money. I have done everything possible to please those people. I even bought their virtual card to show I’m serious. I wonder why they are treating me this way, maybe because they are an online app,” he said.

One can only hope this is indeed an exception and his case is resolved fairly.

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