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Too easy payments?

Week 14, 2008

The card payment industry has identified cash as the enemy. The development of electronic purses, years ago, and now, the development of contactless payment have the same objective: reduce the share of cash transactions, transform them in electronic transactions, and allow financial institutions to collect some transaction fees.

Besides direct card payments, telecom operators have developed several systems for cash transfer. Most of these systems are proprietary. But some are supported by global organizations. This is the case for the Remittance project supported by the GSMA. The target is migrant workers, who want to remit part of their wages to their often unbanked family and dependants in their country of origin. The remittance project consists in allowing international money transfers over mobile phones. Such systems have already been implemented, with the participation of numerous mobile network operators and financial institutions.

The US Department of State just issued a warning saying mobile banking and payment networks across the world were creating new opportunities for money laundering and terrorist financing. The Department of State says it has identified signs that money launderers and those that finance terrorism will abuse these new m-payment systems as criminals can now transfer money via their handsets to avoid the risk of physical cash movement and bypass financial transparency reporting requirements when sending laundered funds across a country or around the world. In addition, because there is no cash involved in this type of laundering and criminals can destroy their pre-paid phones, there is normally a lack of physical evidence available to the police. To make matters worse, law enforcement and intelligence agencies have yet to catch up with the criminals and have not developed the necessary technical expertise on mobile payments.

As an industry heavily involved in both payments and mobile communication, the smart security industry should be able to propose safeguard systems to allow some control on transactions. It should also obtain recognition as the best source of information and technology education by authorities in charge of struggling against money laundering.

Thierry Spanjaard
Chief Editor
Smart Insights