Anti-Money Laundering

Money laundering is the act of converting money or other monetary instruments gained from illegal activity into money or investments that appear to be legitimate so that its illegal source cannot be traced. It is the process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking, originated from a legitimate source. It is the practice of engaging in financial transactions to hide the identity, source, or destination of illegally gained money. It is the process by which funds are used for illegal activities, though the origin of funds may be legitimate. In the past, the term "Money Laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government and regulators to mean any financial transaction which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting. Money Laundering could affect economy, and integrity of any financial system.

 

Anti-money laundering (AML) is a term mainly used in the financial and legal institutions to describe the legal controls that require financial institutions and other regulated entities to prevent or report money laundering activities. Today, most financial institutions globally, and many non-financial institutions, are required to identify and report transactions of a suspicious nature to the financial intelligence unit in the respective country. For example, a bank must perform due diligence by ascertaining a customer's identity and monitor transactions for suspicious activity.

 

AML is required for the following:

·         To maintain the integrity of financial system

·         To protect the economy

·         To prevent criminal elements from using the banking system for money laundering activities

·         To enable the bank to know the customers and their financial dealings

·         To put in place the appropriate controls for detection and reporting of suspicious activities

·         To comply with law and regulatory guidelines

 

To prevent Money Laundering, following means are implemented in the system:

·         KYC - Know your customer

·         Transaction Limit

·         User Barring

These are critical for financial applications. With the availability of Fraud Engine, it is possible to reduce significant processing costs and charge backs.

Know your customer (KYC) is the due diligence that is performed to identify the client/customer and ascertain relevant information pertinent of doing financial business with them. One aspect of KYC checking is to verify that the customer is not on any list of known fraudsters, terrorists or money launderers. These lists are maintained by designated regularities and third party vendors.

 

KYC norms are different for all the countries. In some countries financial regulators has advised banks to obtain certain personal information of the customer. The objective of doing so is to enable the Bank to have positive identification of its customers. This is also in the interest of customers to safeguard their hard earned money. The KYC guidelines mandate banks to collect customers Photograph, Proof of identity and Proof of address.

 

The system complies with the in-country AML/KYC/CFT (Anti-Money Laundering / Know Your Customer / Countering Financing Terrorism) legislation by fulfilling all the recording, monitoring and reporting requirements for identification and transactions on the system. With capability to provide detailed registration workflows for adhering to KYC norms, the system detects fraud throughout the payment process as well including subscriber registration, payment authorization, merchant billing and customer service.

 

The system captures the following information as part of registration as a minimum requirement:

·         Name

·         Address

·         ID type: ID card or Passport

·         ID card/Passport number

·         Photograph of subscriber/channel users

An interface is provided in User Admin section to verify the KYC. Customer care executive will verify the personnel details and mark as ‘KYC verified’. Customer should be verified in 27 days from the date of registration; subsequently Customer will be barred in the system with a reason ‘NO KYC verification’. KYC verification is an optional check, System Administrator can set the ‘KYC verification required’ as Yes/No in system preferences. In case of third party KYC verification, a batch file will be uploaded in the system to update the status of the Customers.

 

Mobile operators can provide a black list of known defaulters with their MSISDN numbers. System performs cross-check with black list at the time of registration and refuses registration of these Customers. A check on the MSISDN can be defined in the system; like only MSISDN which starts from a defined prefix should be registered, length of MSISDN should match as defined in system preference.

Based on KYC information Customers can be grouped like Platinum, Gold, Silver or Normal users.

Note: Based on in-country AML requirements more information can be captured during registration.

Transaction limit for Customers is configurable and could be defined as per there requirements. For example a normal user can transact 0-100 per day, 0-500 per week and 0-2000 per month. While a Gold user is having a different range for transaction for example 0-300 per day, 0-2000 per week and 0-7000 per month. A minimum amount for any transaction like 10 can be defined to avoid the load on the system and Network attacks. A Customer is allowed to perform a maximum number of transactions per day, for example 5 Cash-IN, 2 cash-OUT and 20 P2P transactions.

The system is highly configurable and has the ability to set AML and fraud rules to track fraudulent and money laundering transactions and account behaviour.

The tracking of fraud transactions using business, fraud and tariff rules revolving around frequency, amounts and the location of transactions are available within system.

 

·         Configuration of higher and a lower limit for single transaction.

·         There is a configuration of a maximum limit for the total number and amount of transactions allowed in a day/ week/month.

·         Min/Max amount per transaction by Service like Cash-IN, Cash-OUT, P2P, etc.

·         There is a configuration of maximum limit for the cumulative amount to be transferred in and out for all transactions occurring in a day.

·         Notifications when a transaction limits are reached.

The system does not allow the transaction if any of these parameters is breached. Additionally reports on transactions, that are flagged or breached are provided.

 

Furthermore, the system generates Logs files/ audit mechanism to trace all activities happening in the system. Log file format is defined in such a way so that it captures all required information for all kinds of transactions. These Log files are used for reporting and system analysis and also for the reconciliation activities. These log files provide a very good mechanism to detect fraud if required.

 

Additionally, the system is capable of suspending/barring users in case fraud is suspected.  Since system is capable of storing the registration details and employs a maker-checker principle, a new customer can only use the account after their details have been verified by the designated personnel.

 

In order to use the services, customers need to authenticate with entering the PIN number issued at the time of registration. In case customer entered the wrong PIN for consecutively for a configured number of times, then the system suspend that customer and customer is not allowed to access the system.

 

All these features make the system well equipped to handle the KYC, AML and CFT requirements.

 

 

 

Mobile Commerce – An Intelligent endeavor