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Protecting Mobile Money against Financial Crimes
Settlement Institution In all plans, including closed systems, banks involved in the settlement of the transaction stated that they filed suspicious transaction reports with authorities. Closed-system settlement banks that oversaw the pooled accounts filed such documents only for questionable retail outlet activity, however. This is because transactions that occur within the system—that is, from virtual account to virtual account—do not require cash settlement. Because there are no changes in the pooled account that the bank holds, the bank is unable to see such transactions. After examination of the relevant AML/CFT procedures carried out by providers at each step of the transaction, it is important to emphasize that the regulatory responsibility for each type of provider (MNO, bank, or third-party provider) may vary, depending on the specific type of business model at hand.
Summary and the Rule of the Account Provider The newness of m-money has inspired many business models and a great variance in the degrees of participation by numerous kinds of providers. Because it is unclear where the market is headed (that is, “which model is best?” if such a question can ever be answered definitively), a framework for analysis should work in a provider-neutral way. The three central functions of any m-money scheme (customer interface, transaction processing, and account provision) have been observed to be provided by MNOs, banks, and other kinds of entities. Procedures relevant to market integrity—including customer due diligence, internal controls, monitoring, reporting, training, and recordkeeping— have all been identified in each of the five steps through which a transaction passes. It seems that in each of these five steps, the provider of the account records is the one that plays the greatest role in AML/CFT obligations. This finding can lead us to the rule of the account provider: the provider who manages the account records is in the best position to supervise the AML/CFT procedures of the providers at the other stages, and it may be advisable to place the legal burden for regulatory compliance on that provider. This is because the account records function is where the information about customers, retail outlets, and activity all comes together. Whether this function is provided by an MNO, a bank, or another type of entity, the rule holds true. It is important, however, to note that many types of providers may hold the function of an AP. Therefore, regulators