Published by: http://www.worldbank.org/

by Pierre-Laurent Chatain , Raul Hernandez-Coss , Kamil Borowik , Andrew Zerzan

Governments are challenged to make an innovation-friendly climate while simultaneously ensuring that business development remain sustainable. Criminal use of the technology—terrorist financing and money laundering—challenges long-run business viability via risk of massive investment flight and public distrust of new players entering the market.

Sustainable business models are those that base regulation on a careful risk-based analysis. This study identifies the perceived risks and compares them with the actual level of risk for each category of mobile phone financial services. The comparison reveals that the perceptions do not weigh up to the reality. Based on fieldwork in seven locations where the technology has taken off, this paper finds that providers apply measures that are consistent with international standards to combat money laundering and terrorist financing. It identifies the sometimes non-traditional means the industry uses that both mitigate the risks and are in line with good business practices. Acknowledging that mobile phone financial services are no riskier than other channels, governments are called to treat them as an opportunity to expand access to finance.

Table of Contents

  1. Introduction

  2. m-FS Growth Potential and Concerns
    m-FS Offers Unique Economic Development Potential
    m-FS Development Demands a Convergence of Stakeholder Incentives
    Perceived ML and TF Risks and the Case for Regulation
    Market Access and the Case for Regulatory Balance

  3. Analyzing and Responding to ML and TF Risks: Observations
    New Challenges to Old Risk Analysis Methods
    New Framework for Risk Analysis
    ML and TF Risks Inherent in the Four m-FS Service Categories
    ML and TF Risks External to m-FS Service Categories

  4. Applying FATF Recommendations to m-FS
    Observed Mitigation Responses and their Consistency with FATF Recommendations
    Application of AML and CFT Standards to All m-FS Providers

  5. Conclusions and Policy Recommendations