New Payment Methods and Financial Crime Risks – World Check Thomson Reuters
New Payment Methods may no longer be new, but the term has become synonymous with financial payments transacted via mobile telephones, data storage cards, and internet connections. Naturally, variations of the methods change as technology develops. NFC or Near Field Communications technology is being embraced by the world’s telecommunications giants and will fuel a massive increase in the mobile payments market – China alone estimates it will have 410 million users of NFC enabled mobile payments as early as 2013.
Technology may be enabling this market but it is not necessarily driving it as
there is an admirable global political movement for social and financial inclusion. In April 2011 the world’s financial inclusion policymakers met in Kuala Lumpur, Malaysia, and discussed issues ranging from consumer protection and education to regulatory integrity. The issue of financial crime, money laundering, and terrorist financing was raised but was rightly recognised as only one aspect of these new, fast moving, and exciting financial developments.
This paper does not describe in detail how the methods work but looks at the
risks involved to those businesses providing the NPM services. Interestingly, this includes businesses within the regulated financial sector (e.g. banks, money service businesses) and businesses outside of the sector (e.g. telecommunications companies).
The risks include possible abuse of services by criminals and terrorists, compliance action by regulators, prosecution by law enforcement, and reputational damage due to media exposure.
In 2006 the Financial Action Task Force (FATF) published its first typology on NPMs, acknowledging that very little was known about them and their potential misuse. A much more comprehensive and better informed FATF report was published in October 2010 and I recommend it to readers, with advance warning that it runs to 117 pages.