Integrity in Mobile Phone Financial Services

Pierre-Laurent Chatain

Description

Governments are challenged to make an innovation-friendly climate while simultaneously ensuring that business development remain sustainable. Criminal use of the technology-terrorist financing and money laundering-challenges long-run business viability via risk of massive investment flight and public distrust of new players entering the market.
Sustainable business models are those that base regulation on a careful risk-based analysis. This study identifies the perceived risks and compares them with the actual level of risk for each category of mobile phone financial services. The comparison reveals that the perceptions do not weigh up to the reality. Based on fieldwork in seven locations where the technology has taken off, this paper finds that providers apply measures that are consistent with international standards to combat money laundering and terrorist financing. It identifies the sometimes non-traditional means the industry uses that both mitigate the risks and are in line with good business practices. Acknowledging that mobile phone financial services are no riskier than other channels, governments are called to treat them as an opportunity to expand access to finance.

Informations

• Publié par: world-bank-publications
• Publié le: 10 juin 2008
• Nombre de lectures: 25
• EAN13: 9780821375570
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

W O RLD BANK W O RKING P APER NO . 146
Integrity in Mobile Phone
Financial Services
Measures for Mitigating Risks from Money
Laundering and Terrorist Financing
Pierre-Laurent Chatain
Raúl Hernández-Coss
Kamil Borowik
Andrew Zerzan
THE WORLD BANKWP146_FM.qxd 5/20/08 9:17 AM Page i
W ORLD B A NK W ORKING P APER NO . 146
Integrity in Mobile Phone
Financial Services
Measures for Mitigating Risks from Money
Laundering and Terrorist Financing
Pierre-Laurent Chatain
Raúl Hernández-Coss
Kamil Borowik
Andrew Zerzan
THE WORLD BANK
Washington, D.C.WP146_FM.qxd 5/20/08 9:17 AM Page ii
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ISBN-13: 978-0-8213-7556-3
eISBN: 978-0-8213-7557-0
ISSN: 1726-5878 DOI: 10.1596/978-0-8213-7556-0
Cover image by Diego Britos.
Library of Congress Cataloging-in-Publication Data
Integrity in mobile phone financial services : measures for mitigating risks from money laun-
dering and terrorist financing/Pierre-Laurent Chatain ... [et al.].
p. cm. -- (World Bank working paper ; no. 146)
Includes bibliographical references.
ISBN 978-0-8213-7556-3 -- ISBN 978-0-8213-7557-0 (electronic)
1. Home banking services--Security measures. 2. Electronic funds transfers--Security measures.
3. Cellular telephone systems--Security measures. 4. Commercial crimes--Prevention. I. Chatain,
Pierre-Laurent, 1961- II. World Bank.
HG1711.158 2008
332.1'70684--dc22
2008013191WP146_FM.qxd 5/20/08 9:17 AM Page iii
Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
Abbreviations and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Objective. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Scope and Target Audience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Geographical Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Outline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2. m-FS Growth Potential and Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
m-FS Offers Unique Economic Development Potential . . . . . . . . . . . . . . . . . . . . . . . 7
m-FS Development Demands a Convergence of Stakeholder Incentives. . . . . . . . . . 9
Perceived ML and TF Risks and the Case for Regulation. . . . . . . . . . . . . . . . . . . . . . 11
Market Access and the Case for Regulatory Balance. . . . . . . . . . . . . . . . . . . . . . . . . . 14
3. Analyzing and Responding to ML and TF Risks: Observations
of Applied Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
New Challenges to Old Risk Analysis Methods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
New Framework for Risk Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ML and TF Risks Inherent in the Four m-FS Service Categories . . . . . . . . . . . . . . . 20
ML and TF Risks External to m-FS Service Categories . . . . . . . . . . . . . . . . . . . . . . . 29
4. Applying FATF Recommendations to m-FS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Observed Mitigation Responses and their Consistency with FATF
Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Application of AML and CFT Standards to All m-FS Providers . . . . . . . . . . . . . . . . 41
5. Conclusions and Policy Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Policy Recommendations and Issues for Consideration . . . . . . . . . . . . . . . . . . . . . . 48
Appendix A. m-FS Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Appendix B. Types of m-FS and m-FS Services Observed in Fieldwork . . . . . . . . . . . . 57
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iv Contents
Appendix C. Mitigation Measures for m-BSA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Appendix D. Mitigation Measures for m-Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Appendix E. The Financial Action Task Force (FATF) . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Appendix F. Overview of m-FS Risk Identification and Mitigation. . . . . . . . . . . . . . . . 71
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Author Biographies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
LIST OF TABLES
1. The Four Identified Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2. Possible ML and TF Risks and Observed Control Measures for m-BSA . . . . . . . . . . 25
3. Concurrent Use of m-FS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
4. Observed m-FS Licensing and AML and CFT Compliance Requirements . . . . . . . . 32
5. Most Relevant FATF Recommendations for Risk-Based Consideration . . . . . . . . . . 41
6. Factors Contributing to Growth of m-FS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7. m-fINFO in Visited Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
8. m-BSA in Visited Jur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
9. m-Payments in Visited Jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
10. m-Money in Visited Jur . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
11. Observed Limits on m-FS Transactions, USD (2007) . . . . . . . . . . . . . . . . . . . . . . . . . 64
LIST OF FIGURES
1. Convergence of Stakeholders’ Incentives Results in m-FS Growth . . . . . . . . . . . . . . 10
2. Mobile Financial Information Services (m-fINFO) . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3. Mobile Bank and Securities Accounts (m-BSA) . . . . . . . . . . . . . .