The Knowledge Exchange / Risk Management / M-payments: a highway for terrorist financing

M-payments: a highway for terrorist financing

Regulators and representatives from government, industry, law enforcement, academia discuss challenges and benefits

terrorist financingToday, there are more than five billion cell phones. And experts predict that in the next five years, worldwide mobile cellular subscriptions will likely outnumber people, reaching more than 50 billion connected devices by 2020.  But there are only about 1.5 billion people who have direct access to financial services, making mobile payments, usually referred to as m-payments, an attractive alternative to brick and mortar banks. And those with no access are not the only ones who will be attracted: M-payments will be enticing to criminals and criminal organizations as a means to launder money and transfer illicit value.

US consumers are slow to adopt mobile payments for many reasons including interoperability, doubts about security, availability and consumer protection. And yet, mobile payments in the US are expected to gross $214 billion by 2015, including transactions involving mobile bill payments and carrier billing transactions.

These and other challenges were discussed at a recent seminar called “The Growing Threat of M-Payments.” The seminar brought together regulators and representatives from government, industry, law enforcement and academia to discuss the issues related to m-payments.

This seminar focused on the use of cell phones to credit, send, receive and transfer money or digital value. The speakers discussed both the promise and potential threat of m-payments and provided an overview of strategic initiatives to enhance the transparency of m-payments across the government, banking and non-banking financial services industries.  Speakers included:

  • John Cassara, Former Intelligence Officer and Treasury Special Agent.
  • Chip Poncy, Director, Office of Strategic Policy for Terrorist Financing and Financial Crimes, US Department of Treasury.
  • Jay Flowe, Senior Solutions Architect, Financial Crimes Practice, SAS.

I came away with these key insights from the discussion:

  • Mobile phone technology has become a global ‘equalizer’, allowing developing countries to leapfrog land-line technology and giving their citizens much needed access to financial services.  For example, more than 60 percent of Africans (and 80 percent of urban Africans) are in range of a GSM signal, making cell phones the most prized asset of the poor.
  • M-payment transfers are replacing the use of traditional banks and money service businesses; however, m-payment transfers present a growing money laundering threat. Criminals and terrorists value the ability to receive and transfer funds without being subject to financial transparency.
  • Government, regulators, industry and law enforcement must coordinate now to stop the growing threat of m-payments. These entities must work together to incorporate meaningful safeguards into m-payment technology and services.
  • Technology and advanced analytics are required to mitigate the issues. M-payments generate big data, and analytics solutions are critical to help thwart the growing threat of money laundering associated with m-payments.

That’s what I found most interesting. Learn more about m-payments, and share your thoughts with me.

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