Telecoms to Come Under AML Laws
The World Bank has called for Central Bank regulation of telecommunication companies that offer money transfer and mobile banking services — a move that will raise customer charges owing to increased compliance costs.
Increased cost should be no surprise. Telecom companies will, in classic form, pile whatever fees they can on the consumer – even if $1 in cost only prevents $.05 in fraud. Mobile technology offers an opportunity for an estimated three billion low‐income earners to gain access to financial services ‐‐ primarily in Africa and Asia. The World Bank says that the line differentiating financial providers in banking, telecom, credit card, and mobile commerce has become increasingly blurred ‐‐ yet no robust regulations to guard against money laundering have been passed. “Distinctive risks concern observers in affected service markets,” said the World Bank. “These perceptions merit urgent attention because mobile financial service providers may fall outside anti‐money laundering and combating the financing of terrorism controls generally adhered to by traditional financial institutions.” Huh?
The transactions being handled, for a large part, are small transactions. Among the big players behind the scene are banks, once again being disintermediated in the payment process because of their cost structure. The reason for the popularity of mobile payment systems is that the cost of a transaction is very low ‐‐ when the cost of transactions goes down, opportunities appear and volume goes up. It appears to me banks do not understand that the transactions micro‐payments replace are currently being serviced in the local cash economy, because people who use these systems are not banked, and are not likely to be banked. Mobile phone operators are not banks ‐‐ they are in the business of communications, and the small segment of the market represented by mobile payment systems are nothing more than a differentiating feature providers want to offer their clients. It’s a simple way to store a few dollars and settle transactions through a trusted channel. Banks would like to limit consumer’s options, and whatever costs these limitations impose, will be borne by consumers … as always.