Protecting Mobile Money Against Financial Crimes - World Bank

234 Pages·2011·3.97 MB·English

by  World Bank Group

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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: [phone]
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
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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