Mobile money services continue to transform access to financial services across Lesotho, particularly within the informal economy. From street vendors and taxi operators to subsistence farmers and domestic workers, these platforms provide an entry point into the formal financial system for individuals traditionally excluded from mainstream banking. However, Know-Your-Customer (KYC) compliance remains a significant legal and operational challenge for mobile money providers navigating Lesotho’s anti-money laundering (AML) regulatory framework.
One of the most pressing issues is the inability of many informal economy participants to produce conventional proof of income or identity. In a country where cash transactions dominate and formal employment contracts or business registrations are uncommon, mobile money providers often struggle to verify the legitimacy of customer activity. This leads to compliance gaps and heightened legal risk under Lesotho’s Financial Institutions Act and AML guidelines. KYC compliance for informal sector customers is further complicated by strict privacy laws, which prohibit providers from contacting third parties to confirm customer details without prior consent. These restrictions make it difficult to validate customer information in real time and limit the tools available for due diligence.
Lesotho’s mobile money regulatory landscape has attempted to strike a balance between financial inclusion and compliance. While low-value accounts benefit from simplified KYC procedures, business accounts and higher-tier users remain subject to stringent requirements. This regulatory disparity discourages formalisation and can hinder the growth of small enterprises seeking to scale through mobile payment platforms. The lack of a national digital identity infrastructure also means providers must rely on manual processes that are costly, time-consuming, and often insufficient for full compliance.
To address these challenges, mobile money operators in Lesotho can adopt alternative verification methods that align with both KYC requirements and the realities of the informal economy. For instance, transaction pattern analysis, customer history, and community-based verification, such as confirmation by a village chief or community leader, may serve as credible, risk-sensitive alternatives where documentary evidence is unavailable. Working in collaboration with the Central Bank of Lesotho, stakeholders should also aim to establish clearer regulatory guidance on permissible KYC practices tailored for the informal sector.
Clarifying the intersection between KYC obligations and data protection law is equally important. Controlled exceptions allowing for limited third-party verification under AML oversight could reduce legal uncertainty while safeguarding individual privacy. Additionally, long-term investment in digital identity systems would provide a sustainable solution for improving mobile money compliance in Lesotho while facilitating broader access to government and financial services.
Mayet & Associates Attorneys provides expert legal support in fintech regulation, KYC compliance, and AML advisory across Lesotho. Our team advises mobile money providers, financial institutions, and investors on how to navigate the regulatory risks and opportunities in this evolving space. For guidance tailored to your business, contact our compliance and regulatory advisory department today.