It seems that the burgeoning mobile payments market, or M-Payments as they’re more commonly known, is really pushing the boundaries of cheap money transfers and many industry experts see such payments eventually making ATMs obsolete in the not-so-distant future.
But this fantastic innovation does have a fatal flaw — it’s not regulated. Basically, anyone can buy a mobile phone, download the necessary payment software, open an M-Payment account and off you go... Given the global statistics that there are fewer than a billion bank accounts open but nearly three billion mobile phones in operation, this capability is a godsend to folk who can’t (or won’t) open a bank account but need to transfer funds electronically.
But let’s go back to the fatal flaw — the fact that no regulations exist to monitor this wonderful advance in “M-Banking”. It means that this New Payment Method, or “NPM” as FATF has labeled it, is also open for use by the global criminal and terrorist fraternity to move their funds locally and internationally.
At the moment, anyone can open an M-Payment account because stringent KYC checks are not performed by mobile service providers on their customers. This means that a “villain” can sign up for M-Payment services using false identification and “presto” — its move your money time.
An enforcement model that could be copied for this new payments system is the one in operation in the Philippines which is one of the few countries that is proactively taking steps to monitor usage of M-Payments in order to comply with anti-money laundering laws and regulations. Mobile service providers in the Philippines are regarded as money service businesses and are regulated as such with strict KYC procedures. The M-Payment subscriber must register with the service provider in person and present a valid photo identification document to use the system. There is also a transactional maximum, daily aggregate and monthly aggregate limit on the amount of funds that can be transferred from an account.
Law enforcement agencies and the payments industry need to close the loopholes to restrict money laundering activity via M-Payments. Until they tackle this new method it literally is a case of trying to hit a mobile target...
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