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Protecting Mobile Money against Financial Crimes
• Caps on m-money transactions force criminals and terrorists to engage in a large number of transactions that increase the likelihood of their being exposed to detection. As with any other payment channel, it is important to determine if m-money brings any new risk to the market. With a greater chance of detection and more burdens for a terrorist financier to move money, it is unlikely he or she would find m-money more attractive than cash or a bank transfer. The 9/11 terrorists, for example, simply used banks. Like most financial services, m-money is not without potential for abuse; but with the correct controls—especially the capping of transactions—the potential integrity risks arising from it can be kept low.
Balancing Risk Mitigation Techniques with Financial Inclusion Objectives Although integrity risks must be controlled by m-money providers and national regulatory and supervisory authorities, it is also important that regulatory compliance requirements are not unnecessarily conservative. Overly conservative requirements constrain the market, its ability to innovate, and, ultimately, its ability to bring unbanked clients into the network of financial inclusion (de Koker 2004, 2006; Bester et al. 2008; Isern and de Koker 2009).30 Risk mitigation techniques, therefore, should be risk based and proportionate so that they can balance with policy makers’ objectives, such as those promoting financial access for the poor (Isern and de Koker 2009).31 In this regard, a working relationship between providers and their regulators is integral so that regulations may support effective business practices (Bester et al. 2008). Providers have a unique ability to understand the needs and requirements of their clients as well as their own business objectives, and regulators are vested with the power to establish and enforce the most effective policies possible, according to the local conditions of the country. Interviews with some MNOs engaging in m-money services found that a key impediment to their expansion in Africa was the lack of clarity and guidance from some national regulatory agencies concerning the regulatory framework and the business models that they would allow. They noted further that many of the regulatory systems required stringent document-based client identification because the national regulators are concerned about mitigating ML/TF risks (see figure 2.2).