Friday, January 15, 2010

Mobile money a potential conduit for criminal activities

One of the biggest stumbling blocks for mobile money deployments is the regulatory controls designed to ensure that mobile money are not to be used for criminal activities. (By criminal activities it is meant funding of terrorism, money laundering and application of money collected in illegal ways). This is way the need exists to know with a high degree of certainty who did what transaction.

The result of this "need to know who did what transaction" got translated into a dreaded three-letter word: KYC (Know your customer). Anyone that have done a serious (and legal) mobile money deployment will tell you that KYC requirements and compliance are probably the biggest challenge. Without the need for KYC, many deployments would be much easier, less expensive and will be more effective in bringing financial services to the people that need it.

Many people are of the opinion that the level of rigour prescribed are not in line with the risk that is being mitigated. The fact that a poor person in Africa cannot have a mobile money wallet, because he/she does not have a proper ID-document (or proof of residence) is a shame and does very little to help the world fight organised crime and terrorism.

I have became a fan of Dave Birch's thoughts recently and one should read a recent blogpost on this topic. His recommendation makes a lot of sense:

"My suggestion is that we fix on 500 euros as the breakpoint. People should be allowed prepaid cards, prepaid accounts, money transfer accounts or whatever with no identification provided that the maximum balance is limited to 500 euros (it is currently 150 euros) and a maximum annual turnover over 10,000 euros (it is currently 2,500 euros). This will lower costs and ease accessibility -- I might even go and get an O2 Money card -- thus achieving a variety of goals including social inclusion and reduced transaction costs for the poor."

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