AML and KYC Guide For Mobile Payment Providers

Blog / AML and KYC Guide For Mobile Payment Providers

With the effects of technological developments, we are witnessing a change in the payment industry. Every year we meet a new payment system. Each new payment system is gaining great popularity with the different facilities it provides to customers. One of them is "Mobile Payment Systems."

Suppose we need to define mobile payment technologies basically. In that case, the infrastructures that we can access to Bank or GSM operators through certain technologies and verification methods through digital mobile technologies are mobile payment systems. For example, a service provider who wants to mediate payment establishes a service point that can interact and verify with mobile technologies and responds to the requests of end-users with mobile technologies, making the payment process. The World Bank has classified mobile payment systems into four main categories. These are mobile financial information services, mobile bank and securities account services, mobile payment services, and mobile money services.

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Financial Crime Risks in Mobile Payments

Mobile payments allow businesses to provide more personalized and high-quality services using customers' locations, shopping habits, and preferences. On the other hand, it provides more efficient use by providing ease of access and comparison of the price of the products in different places, discounts, and other campaigns. In addition to these advantages, mobile payments face many threats and security problems. Criminals have tried new methods and new systems for money laundering from the past to the present. Due to the strong AML programs of banks and existing financial institutions, criminals try to commit money laundering through new financial services. Mobile payment systems, therefore, face financial crime threats such as money laundering and terrorist financing.

Here are some of the financial crime risks associated with mobile payments:

  • Phishing Scams: With mobile payments, it's easy for fraudsters to impersonate legitimate companies and trick users into revealing their financial information.
  • Account Hacking: Hackers can gain access to mobile payment accounts by cracking passwords or using malware.
  • Money Laundering: The anonymity and ease of use of mobile payments make it attractive for money launderers to use it to clean their illicit funds.
  • Skimming: This occurs when fraudsters attach skimming devices to ATMs or card readers to steal card information. Mobile payment devices are not immune to skimming.
  • SIM Swap Fraud: This occurs when a fraudster gains control of a mobile phone number by tricking the carrier into transferring the number to a new SIM card.
  • Card Not Present Fraud: This occurs when a fraudster uses stolen card information to make an online purchase without a physical card. With mobile payments, this type of fraud can occur simply by using a stolen phone.

It is crucial for mobile payment providers and users to be aware of these risks and take necessary steps to prevent financial crime. This includes using strong passwords, enabling two-factor authentication, monitoring transactions regularly, and being vigilant for signs of fraud.

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AML Compliance Program for Mobile Payment Providers

AML compliance is an essential component of any mobile payment provider's operational and risk management framework. To minimize risks, mobile payment providers must implement a robust and comprehensive AML compliance program that meets the regulatory requirements set forth by the Financial Action Task Force (FATF) and other relevant regulatory bodies.

The AML compliance program for mobile payment providers should include a set of procedures, policies, and controls that help to identify, assess, and mitigate financial crime risks. The program should also involve the development of an effective customer due diligence (CDD) process, which includes the collection of customer data, risk profiling, and ongoing monitoring of transactions to detect unusual or suspicious activities. The implementation of AML sanctions screening, transaction monitoring, and reporting mechanisms is also crucial for the effective implementation of the AML compliance program.

Moreover, mobile payment providers should provide AML training to their employees to raise awareness about financial crime risks and the importance of AML compliance. Regular internal audits and assessments should be conducted to ensure that the AML compliance program is functioning as intended and to identify and remediate any weaknesses.

KYC and CDD Procedures for Mobile Payment Providers

Know Your Customer (KYC) and CDD procedures are the basis for AML/CFT compliance. Mobile payment providers have a wide range of customer profiles. Therefore, mobile payment providers have to detect risks and threats during the customer account opening process. The purpose of the risk assessment is to implement a risk-based approach. For a risk-based approach AML control program, mobile payment providers must follow CDD and KYC procedures in the customer onboarding process.

In this process, identity verification is applied first. Then, customers are checked on international lists that include high-risk and banned people. These lists are generally sanction and PEP lists. There are thousands of sanctions and PEP lists in the world, and businesses cannot control their customers manually. This is impossible. The Sanction Scanner database contains sanction, PEP, and adverse media data from more than two hundred countries. Sanction Scanner always monitors and configures this data instantly. With our product AML Screening Software, mobile payment providers can control their customers in comprehensive global sanction, PEP, and adverse media data. Sanctions, PEP, and adverse media scanning are completed in seconds. Besides, mobile payment providers can integrate AML screening software with their own projects with API support and automate all control processes.

Organizations in the payment industry create AML programs to protect themselves from financial crime threats.

Ensuring Effective AML and KYC Training and Awareness for Mobile Payment Staff

One critical component of any effective AML/KYC program is training and awareness for all staff members. This is because the first line of defense against financial crime is often the employees who interact with customers and process transactions. To ensure that they are prepared to detect and report suspicious activity, they must be trained on the latest AML/KYC best practices, as well as the company's policies and procedures.

Here are some key elements of effective AML/KYC training and awareness for mobile payment staff:

  • Comprehensive training: Employees must receive comprehensive training on all relevant AML/KYC topics, including the latest risks and threats, as well as how to detect and report suspicious activity.
  • Regular updates: As the financial crime landscape evolves, staff training must be updated to keep pace. This includes providing regular refresher courses, as well as ensuring that employees are aware of any changes to AML/KYC policies and procedures.
  • Role-specific training: Staff members have different roles and responsibilities, and their training must reflect these differences. For example, customer-facing staff must be trained on how to identify and respond to suspicious activity, while back-office staff must be trained on the latest AML/KYC technologies and tools.
  • Simulated scenarios: To help employees understand how to identify and respond to suspicious activity in a real-world setting, they should be trained using simulated scenarios. This will help to build their confidence and ensure that they are prepared to respond effectively if faced with a potential AML/KYC breach.
  • Awareness posters and videos: In addition to formal training sessions, mobile payment providers should use a variety of awareness-raising materials, such as posters and videos, to help keep the topic of AML/KYC front-of-mind for employees.

In conclusion, ensuring effective AML/KYC training and awareness for mobile payment staff is an essential part of any robust AML/KYC program. By providing staff with the knowledge and skills they need to detect and report suspicious activity, mobile payment providers can protect their customers, their reputation, and their bottom line.

Detection of Suspicious Transactions in Mobile Payments

The purpose of the compliance program is to detect financial crimes. Suspicious transactions carry a high risk of financial crime. Therefore, mobile payment providers are responsible for detecting suspicious transactions in financial transactions. They mediate and report these suspicious transactions to financial intelligence units. That's why mobile payment providers need 3rd party software to control all customer transactions.

Our AML Transaction Monitoring software enables mobile payment providers to automatically control all customer transactions according to specific rules and scenarios. With this software, the mobile payment provider creates rules and scenarios according to their risk level. Customer transactions are automatically scanned according to these rules. If rules and scenarios are triggered, the system generates an alarm. The compliance officer then examined the transaction that generated the alarm and reported it to the authorized units with the suspicious activity report.

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