USEFUL GLOBAL STATISTICS World Population: 7,244,272,280 (July 2014) Active Mobile Phones: 7,300,000,000 (2014) Unbanked: 2,500,000,000 Unbanked With Mobile Phones: 1,000,000,0000 International Migrant Workers: 232,000,000 (2013) International Remittances: 542,000,000,000 (2013) Note: Does not include informal transfers. Why Mobile Banking? • Financial Inclusion Unbanked Disaster Relief Conflict Zones Mobile Financial Services Mobile Financial Information Services • Access data related to personal and/or general financial information Mobile Banking & Securities Account • Electronic channel to access financial services to execute financial transactions relative to bank or securities accounts Mobile Payment Services • Allows non-bank account holders to make payments, through a bank or non-bank entity (e.g. mobile operator, credit card company) Mobile Money • Value stored on mobile phone or mobile phone account for the purpose of issuance, intermediation, multi-purpose use & and redemption of electronic money M-Wallet • Loaded with money prior to use via bank or loading partner • Funds securely accessed from the mobile phone • More convenient than Prepaid Cards • Employers can pay salaries • Pay for goods or services or transfer money through SMS or Near Field Communications (NFC) “Teller’s Window” Risk Factors Risk Perceptions Risk Factors Unknown Identity False Identification Smurfing Anonymity Pooling & Delegation Elusiveness Speed Rapidity M-FS Providers Fall Outside of Regulations Poor Oversight M-PESA: The Gold Standard • 2005 Pilot: PrivatePublic Partnership • Launched in 2007 • 2/3rds of Kenyan adults utilize it • 25% of GDP transactions Future Developments • 2016 Asia Positioned To Surpass Africa in Mobile Transactions • Safaricom: Transitioning from being a wireless carrier with a M-Wallet to a wireless company with a full range of banking services • M-Shwari New product associated with M-Pesa Establish interest bearing bank savings accounts without having to visit bank or fill out any forms Move money in and out of M-Shwari savings account to M-Pesa account without charge Micro-credit anytime and receive loan instantly to M-Pesa account What is M-Paisa? Secure, fast and cost effective way to move money using a Mobile phone Targeted at the “unbanked” population Transactions at an agent: Deposit Cash-Exchange cash for e-money Withdraw Cash-Exchange e-money for cash Customer Must use Agent Anytime. Anywhere. Anyone. Receive and Repay Loans Send/Receive Money Buy Airtime Receive salaries Pay bills Customer Does Not Need to Visit Agent International Remittances The World Bank Will Mobile Finance Replace MSBs? Hawaladars Mobile Finance • Inexpensive • Inexpensive • Efficient • Efficient • Reliable • Reliable Airtime = Currency Process: Code to unlock airtime is sent via text message. Recipient trades the code for cash or goods, making airtime a virtual currency. Besides being used to obtain cash or goods, there have been reported instances of airtime being used to pay small bribes too. International Recharge (Top Up) Services Mobile Money Remittance: Mobile minutes are a widely accepted and valuable form of currency in many countries. Small Sums To Fund Terrorism • • • • Westgate Mall (Kenya) Attack: 61 dead & 175 wounded Annual Income in Somalia: $140.00 Daily Cost Per Al-Shabaab Soldier: $1.00 U.S. Fundraising: – Two Minnesota women held a teleconference and obtained pledges from 21 people totaling $2,100.00 – Minnesota man created fake charity for Somali orphans and raised $1,500.00 – San Diego taxi driver raised $8,500.00 – San Diego woman raised $1,450.00 – St. Louis taxi driver raised $21,000.00 Potential Terrorist Finance Threat! Taliban Al-Shabaab FATF Recommendations For Mobile Financial Services • Licensing & Registration Process • Customer Identification • Record Keeping • Internal Controls & Monitoring FATF Recommendations to Mobile Financial Services Licensing & Registration Process Customer Identification • Basel Core Principles • Special Recommendations VI (Alternative Remittances) “Each • FATF Recommendation 5 country should take measures to ensure that…legal entities, including agents, that provide a service for the transmission of money or value, including transmission through an informal money or value transfer system or network (mobile remittances) should be licensed or registered and subject to all the FATF recommendations that apply to banks and non-bank financial institutions” Outlines CDD and KYC principles. • FATF Recommendation 8 “Financial Institutions should pay special attention to any money laundering threats that may arise from new or developing technologies that might favor anonymity, and take measures, if needed, to prevent their use in money laundering scheme.” FATF Recommendations to Mobile Financial Services Record Keeping Internal Controls & Monitoring • FATF Recommendation 10 • FATF Recommendation 15 Requires financial institutions to maintain all necessary records on domestic and international transactions for at least five years following the completion of the transaction. Requires financial institutions (banks and non-banks) to develop AML and CFT programs. These programs should include, among others, internal policies, procedures, and controls, including appropriate compliance management arrangements and an audit function to test the system. QUESTIONS?