Earlier this year, the Wolfsberg Group, a group of the largest international financial institutions, published its Guidance on Mobile and Internet Payment Services. The aim of the paper is to assist financial institutions in their risk assessments for the wide range of companies that offer mobile and internet payment services.
The Wolfsberg group publishes these requirements in order to prevent that financial institutions can become a channel for criminal purposes. As such, the recent guidance supplements the Wolfsberg Group Statements on Credit/Charge Card Issuing and Merchant Acquiring Activities, and on Prepaid and Stored Value Cards.
Risk and countermeasures framework
The guidance paper outlines that Non Bank Service Providers (NBSPs) may offer a range of Mobile and Internet Payment Services (MIPSs) which can range from bill payment solutions, charity payments, money on mobile phone’s to payment for internet-enabled commerce. It is noted that in order to facilitate financial inclusion, a wider range of such solutions can be expected to become available in the future.
The paper lists the design and product factors that need to be taken into account to establish the nature of the payment system and the risks involved. Prominent amongst the risk factors are the segmentation of the service offering, the ability to load or withdraw cash and the ability to load using alternative payment methods.
One of the risk factors identified is the ability to reload a certain device. Whereas it may be considered a risk factor, the report doesn’t acknowledge the contribution that reloading can have for anti-money laundering monitoring purposes. Reloadable devices allow for the analysis of repetitive transactions and may therefore provide more insight than a sequence of transactions via separate non-reloadable devices.
The report takes a pragmatic angle and identifies classes of risk and classes of countermeasures. For low risk propositions for example – such as low value transactions executed by a supervised e-money institution or payment institution – the guidance outlines that no identification and verification of identity is necessary. This should occur however, when the risks of the product and provider are deemed medium or high.
New payment systems do not necessarily constitute a high money laundering risk
The report counters the widely-held perception that all innovative payments arrangements represent an automatic high risk of money laundering. The Wolfsberg group underlines that there is a broad spectrum of risk and mitigants for these arrangements and warns that a general approach cannot be taken.
Particularly in cases where new payment methods are provided by institutions that have the appropriate license regime, there is a good possibility to manage risk. This can be done through a comprehensive AML compliance programme, which will include robust customer due diligence, effective transaction monitoring and appropriate staff training.
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