Protecting Mobile Money Against Financial Crimes - World Bank PDF
Preview Protecting Mobile Money Against Financial Crimes - World Bank
dd ee zz riri oo hh utut AA e e rr uu ss oo clcl ss DiDi c c blibli uu PP dd ee zz riri oo hh utut AA e e rr uu ss oo clcl ss DiDi c c blibli DIRECTIONS IN DEVELOPMENT PuPu Finance dd ee zz riri Protecting Mobile Money oo hh utut AA e e against Financial Crimes rr uu ss oo sclscl Global Policy Challenges and Solutions DiDi c c blibli uu PP Pierre-Laurent Chatain, Andrew Zerzan, Wameek Noor, Najah Dannaoui, and Louis de Koker dd ee Foreword by Bob Christen, The Bill & Melinda Gates Foundation zz riri oo hh utut AA e e rr uu ss oo clcl ss DiDi c c blibli uu PP Protecting Mobile Money against Financial Crimes Protecting Mobile Money against Financial Crimes Global Policy Challenges and Solutions Pierre-Laurent Chatain, Andrew Zerzan, Wameek Noor, Najah Dannaoui, and Louis de Koker Foreword by Bob Christen The Bill & Melinda Gates Foundation © 2011 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved 1 2 3 4 14 13 12 11 This volume is a product of the staff of the International Bank for Reconstruction and Development / The World Bank. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The bound- aries, colors, denominations, and other information shown on any map in this work do not imply any judgement on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development / The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with com- plete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone: 978-750-8400; fax: 978-750-4470; Internet: www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422; e-mail: [email protected]. ISBN: 978-0-8213-8669-9 eISBN: 978-0-8213-8670-5 DOI: 10.1596/978-0-8213-8669-9 Library of Congress Cataloging-in-Publication Data has been requested. Cover photo: istock.com Cover design: Naylor Design, Inc. Contents Foreword xi Preface xiii Acknowledgments xvii About the Authors xxi Abbreviations and Glossary xxv Overview xxix Introduction 1 Demand for Insight on the Connection of Mobile Money with Anti-Money Laundering and Combating the Financing of Terrorism 1 The M-Money Landscape: Potential and Challenges 2 Objectives of This Report 4 Scope of This Report 4 Target Audience 5 Methodology 6 Outline of the Book 6 Notes 7 References 8 v vi Contents Chapter 1 Analysis of the Mobile Money Transaction Flow 9 Summary 9 Introduction: Regulating by Provider Type Is Insufficient 11 Mapping the System: From Mobile Service to Settlement 12 The Retail Outlet’s Role: Customer Interface and User 14 Who Does What: Multiple Providers 19 Market Integrity Roles Assumed by Providers 25 Summary and the Rule of the Account Provider 28 Notes 29 References 30 Chapter 2 Assessment ofPotential Money-Laundering and Combating the Financing of Terrrorism Risks and Their Potential Mitigation Techniques 31 Summary 31 Integrity Risks in Theory: Placing Them into Four Major Risk Categories 33 Fieldwork Finding: Perceptions of Integrity Risks May Be Higher Than Merited 37 Integrity Risks in Reality 40 Techniques Used to Effectively Mitigate M-Money Risks 49 M-Money Risks and Mitigation Techniques Specific to the Financing of Terrorism 53 Balancing Risk Mitigation Techniques with Financial Inclusion Objectives 54 Notes 58 References 61 Chapter 3 Overview of Anti-Money Laundering and Combating the Financing of Terrorism Regulatory Practices and Risk Management Frameworks for Mobile Money 63 Summary 63 Licensing and Registration of M-Money Providers 65 Supervision of M-Money Providers 71 Stocktaking of Current Preventive AML/CFT Obligations 75 Contents vii The Role of Retail Outlets 92 Notes 99 References 102 Chapter 4 Anti-Money Laundering and Combating the Financing of Terrorism Policy Guidance for Countries Regulating Their Mobile Money Markets 105 Summary 105 AML/CFT Guidance for Policy Makers 107 AML/CFT Guidance for M-Money Providers 125 Recommendations for the FATF 136 Notes 139 References 142 Appendix A The Interplay between Financial Inclusion and Compliance with Anti-Money Laundering and Combating the Financing of Terrorism Regulation: Key Issues for Consideration during Mutual Assessments 143 Background 144 Financial Inclusion and AML/CFT 145 Policy and the Regulatory Approach 146 Know-Your-Customer Obligations 147 Recordkeeping 149 Retail Outlets 149 Reporting Obligations 151 Statistics 152 Supervision and Enforcement 152 Notes 154 References 155 Appendix B Mobile Money: Growth Potential, Current Landscape, and Factors for Success 157 Potential for Growth 157 The Current M-Money Landscape 158 Profitability of M-Money Providers and the Factors for Success 162 The Current Global Regulatory Scenario 163 Notes 164 References 165 viii Contents Appendix C Customer Due Diligence Obligations and Mobile-Money Services: Key Questions and Solutions 167 Know-Your-Customer and the Risk-Based Approach: Principles and Limits 167 Why M-Money Services Carry Low Risks 169 Relaxed CDD for M-Money: Three Possible Scenarios 171 Notes 174 References 176 Appendix D Reporting Obligations in the Particular Context of Mobile Money 177 Allocation of Responsibilities 178 Related Rights, Obligations, and Processes 180 Contents within an STR 181 Note 183 Index 185 Boxes 1.1 Defining Closed and Open M-Money Systems 16 1.2 A Hypothetical $10 Deposit and Its Movement into a Closed System 20 2.1 ML/TF Threat and Risk Indicators 36 2.2 Cost and Time May Make M-Money Channels Unappealing to Criminals 41 2.3 Cases of Consumer Fraud through M-Money: The Philippines Experience 46 2.4 The FATF and the Risk-Based Approach to M-Money and AML/CFT Compliance 51 2.5 Risk-Based Determination of Transaction Limits in the Republic of Korea 52 2.6 South Africa’s RICA and Potential Implications for Financial Access 56 3.1 Examples of Countries with a Provider-Based Licensing Regime 66 3.2 Examples of Countries with a Service-Based Licensing Regime (E-Money and Payment Service Licenses) 68
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