Potential Money-Laundering and Combating the Financing of Terrorism Risks
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unstructured supplementary service data dial numbers (which would allow a financial institution to operate in an MNO’s mobile network) are given only to MNOs by the national communications authority of a jurisdiction; therefore, banks must pay MNOs for their use if the bank wants to engage in m-money services.12 Hence, practices such as these among MNOs and banks have provided both entities an incentive to accuse each other of posing elevated integrity risks, and they may have prevented the emergence of more m-money programs. On another note, the banks’ and MNOs’ lobbying strength with national authorities in a specific jurisdiction could play a significant role in determining the type of provider allowed to operate m-money services.13 There could also be integrity risks arising from the manner in which a particular m-money business model is structured. For example, the mmoney operator in one country does not charge a fee to cash-in, but a fee is charged when the consumer transfers the money. Thus, there are reports of small groups of people having pooled their money to cash-in to one specific account, thereby avoiding transfer fees that would have been incurred if each person had done it through his or her separate account. The recipient receives the pooled money and manually disburses it to each respective remittance recipient. Multiple vulnerabilities may arise from that situation. First, retail outlets may not be in a position to identify the origins of funds pooled into one single account, thereby losing the paper trail. Second, the situation is aggravated by the possibility that a retail outlet is not following procedures and checking the identity and source of funds. And, third, the retail outlets may be involved in the criminal syndicate.14 It is difficult to draw any concrete conclusions from the small handful of actual cases of integrity abuse that have surfaced. However, it seems that m-money retail outlets and employees of the MNOs and banking service providers may pose a distinct ML/TF risk. Employees may have or gain access to client details, and they may know the system and controls well enough to circumvent them. Retail outlets, however, can receive substantial volumes of payments and may extract them as a legitimate product of business, perhaps by integrating the funds into legitimate sources of business. Or retail outlets could be fraudulent, defrauding their clients and the banking services provider. Their businesses could also serve as fronts for ML/TF activity. For instance, they may collude with coconspirators who pose as their customers or assist in creating accounts for nonexistent or unwitting clients.15 Hence, enhanced risk mitigation measures (enhanced due