Potential Money-Laundering and Combating the Financing of Terrorism Risks
Figure 2.1 percent
43
Volume of Coins in Circulation and Their Growth Rates, 2000–08
2.5
year-to-year comparison
2.0 large-value coins (¥ 500 + ¥ 100)
1.5 1.0 total value of coins
0.5 0 –0.5
small-value coins (¥ 50 + ¥ 10 + ¥ 5 + ¥ 1)
08 20
07 20
06 20
05 20
04 20
03 20
02 20
01 20
20
00
–1.0
year Source: Bank of Japan 2008.
“Threat” can be defined as the likelihood that ML may be attempted. The level of ML threat is influenced by the overall ML environment and attractiveness, which could include exogenous factors at both the national and sector levels (Todoroki forthcoming). “Risk” can be defined as a residual exposure to threats of ML after taking vulnerability into consideration. Thus, risk is a function of threat and vulnerability. This risk is considered to be potentially inherent in any economic sector; however, the degree of ML/TF risk faced by various sectors may differ. If this framework is applied to m-money, one can argue that vulnerability is low because there are no novel weaknesses in m-money platforms. Even where national regulatory and supervisory frameworks are absent, m-money providers have internal controls and mechanisms in place. The threat from m-money is also low because the likelihood that ML may be attempted by alternative channels, such as cash, is always likely to be greater than the likelihood that m-money will be used in the attempt. In fact, as box 2.2 demonstrates, the total costs of ML or TF through m-money, relative to other channels, are likely still greater. Hence, because risk is a function of threat and vulnerability, the risk emerging from m-money should also be comparatively low.