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Mobile financial services .typology (Customer due diligence (CDD) (The…
Mobile financial services .typology
Illegal websites
Criminals running illegal websites (e.g. child exploitation images) may use m-FS to accept payments in an attempt to evade law enforcement. This approach avoids the need for the criminal website provider to accept a credit card and run the risk of fraud arising from customers’ use of stolen cards. In developing countries, many potential customers of the website will not have access to a credit card, so the use of m-FS as the payment mechanism greatly increases the potential market.
Red flags
One receiving customer with many transactions from different senders.
Transactions sent at any time of day.
The same senders frequently processing the same transactions.
Frequent, possibly daily withdrawals at agent.
Websites advertising m-FS as a payment method.
A specific profile, typically males, fitting the type of customer .making payment.
Small transactions being sent in incremental amounts.
Kidnapping
the kidnappers communicate with the victims’ families via mobile phone and, in some cases, demand payment via the M-PESA mobile banking system.
Red flags
Maximum amounts of funds being sent through m-Payments on a number of concurrent days; this may be difficult to identify as the payments could represent legitimate transactions.
Transactions far in excess of the normal profile for the customer.
Transactions occurring at any time of day with the receiver making frequent .withdrawals of the funds.
Withdrawals in remote locations.
Linked accounts receiving payments exceeding the transaction
thresholds of individual accounts.
Agent due diligence (ADD)
To help manage these risks, service providers will need to ensure that a robust due diligence process is in place to vet prospective agents. This process should focus on verifying the legitimacy of the agent’s core business and ownership structure.
Customer due diligence (CDD)
The registration and CDD processes used by MNOs need to reflect the risk profile of customers and be proportionate.
For lower-risk customers very little CDD information may be collected. This may be limited to basic information such as name, address and date of birth.
For higher-risk customers (in particular those with the facility to conduct higher- value or international transactions), MNOs should obtain appropriate additional information to understand these customers’ circumstances and business. This may include the expected level of transactions and the source of the funds.
CDD information should be regularly updated, with customers’ risk profiles being subsequently reviewed.
Watch lists and sanctions screening for mobile financial services
At the time of an account being opened, and on a continuous basis, customers and agent entities and their owners should be screened against relevant financial sanctions lists. In addition, customers and agents should be screened to identify potential PEPs and other high-risk individuals.
MNO staff and agent training
The MNO should ensure that all relevant central staff receive AML training, with more specialised training provided to senior management and key control staff, e.g. agent trainers, audit staff and AML teams.
The most important and challenging form of AML training is that provided to agent networks.
The AML training programme should ensure that agents receive training before commencing business
Suspicious activity reporting systems for mobile financial services
Regular alerts on typologies employed by criminals using m-FS, as well as feedback on SARs actually submitted,
Automated transaction monitoring for mobile financial services
In the context of m-FS, a sophisticated criminal will attempt to avoid detection by using multiple false identities, and false accounts, and will transact via numerous agents to launder the proceeds of crime. To combat this activity, an automated system that can detect unusual patterns across a wide range of agents is essential.
Compliance monitoring
Remedial action should be taken. Agents should have a contractual obligation to comply with the MNO’s AML policies and procedures.
The compliance monitoring programme should also cover the training regime of staff and agents, with particular emphasis on levels of competence and understanding. The number and quality of SARs submitted by agents and staff should also be reviewed.