Benefits of using Pre-paid/Stored Value Cards: Attn : Please place graphicEasy to get & Convenient Affordable Reduceduse - • Can be • Funds are overdraft riskAvailability purchased, immediately • Reduces risk of reloaded (for available overdraft• Card-holder/buyer Open & Semi- anonymity • Often at lower • Allows nearly open), redeemed cost then when immediate• Credit checks not and refunded at using traditional required liquidity to users conveniently banking services• Evidence of located identification may merchants e.g. not be required supermarkets
FATF definition of ‘Money Laundering’ - “the processing of…criminal proceeds to disguise their illegal origin” in order to “legitimize” the ill-gotten gains of crime. FATF, ‘What is money laundering?, Basic Facts About Money Laundering’, at http://www.fatf-gafi. org/MLaundering_en.htm.
Typically, Money-laundering is segmented into 3 stages: Attn : Pls place graphic • Process through which illegal funds or assets are introduced into the financial Placement system or converted into monetary instruments • Process through which illegal origins of Layering placed funds are disguised • Process through which disguised/layered funds are made Integration available for investment in legitimate or illegitimate business
Money- Money-Laundering Process through Pre-paid/SVC Pre- Attn : pls place graphic Usage: • Easy to acquire; • Bank account not LAYERING required; • can be used as a • Accepted online, via means of payment by fax or through non- • Value is either: criminals; ﬁnancial outlets; • redeemed (Closed • can be used to make• May not require face- or Semi-closed payment for services to-face verification Cards), or rendered • sent overseas PLACEMENT INTIGRATION
Regulatory Framework addressing Pre-paid risk in Singapore Two categories of E-money in Singapore -Electronic Money Single Purpose & Multiple Purpose Stored Value SPSVCs – only to pay for goods/services of issuer MPSVCs- to pay for goods/services of other merchants • The Banking Act (s.77A) allows only banks authorized by Monetary Authority of Singapore to issue MPSVCs; • Payment System (Oversight) Act 2006 (s.33) allows any entity/person to issue MPSVCs with stored values MPSVFs below S$30 million; who can issue • SPSVCs may be issued by any entity.
India: Regulatory Framework Pre-paid risk in Regulatory Framework addressing IndiaPre-paid payment Pre-paid payment instruments facilitate purchase of instruments goods and services against the value stored on such instruments - smart cards, magnetic cards, m-wallets Closed system, Semi-closed system, Semi-open system Types and Open system Banks and NBFCs can issue Open System Cards, subject Who can issue to approval from RBI. Others are allowed to issue other system cards other than Open System Entities issuing closed-system pre-paid card are License and exempted, subject to reporting requirements to RBI; Supervision All other entities would require RBI authorization
Capital Only Banks/NBFCs meeting regulatory Capital Requirements Adequacy Ratio are allowed to issue all types of Pre- paid Instruments KYC/AML/CFT rules applicable based on the features of KYC/AML/CFT instruments and vulnerability of misuseDeployment of Collected money should be held with the issuing entities. Non-bank issuers (except those exempted) required to maintain outstandingMoney collected balance in escrow account with a scheduled bank. Reloading of Both banks and NBFCs may issue reloadable instruments. Cards Reloading Closed System Cards allowed at retail agents. Bank issued SVCs can be reloaded at ATM & through Internet banking.
Pre-paid payment instruments can be used for transferMoney Transfer of funds online or using mobile phone networks. KYC/AML/CFT rules applicable based on the features of KYC/AML/CFT instruments and vulnerability of misuse Security and Adequate information and data security systems, andFraud Prevention prevention and detection of frauds should be at placeComplaints and Effective mechanism for redressal of customer Redressal complaints shall be in place
Regulatory Framework addressing Pre-paid risk in Sri LankaMain Legislation Payment and Settlement System Act, 2005 Money, Payment, Clearing and Settlement Providers Regulation Regulation No. 1 of 2007 Regulation empowers Central Bank of Sri Lanka (CBSL) to supervise, regulate and monitor service providers including entities offering money service or payment system Direction on Service Providers of Card Based Payment Instruments – made under Regulation No. 1 of 2007
Card Based A payment instrument or “Payment card” includes - Payment Credit Card, Charge card, ATM card, Debit Card, Stored Value Card Instrument A physical or virtual Card-Based Payment Instrument acquired by Prepaid Card Cardholder by paying advance amount, and value of funds is installed in card as stored value, presented in rupee or converted into other units Single/Multi- A physical or virtual Prepaid card issued to executepurpose Stored payment of an obligation/s incurred in single type of Value Card economic transaction Specialized A non-bank institution registered by CBSL for Stored Stored Value Value Card business of single-purpose multi- Card merchant, multi-purpose multi-merchant and non- merchant
Non-bank entities are required to register at CBSL asRegistration Specialized Stored Value Card Institution to issue Stored Value Card Stored Value Card used for transactions in Sri Lanka are Currency required to calculate units in rupees Prior Notification to CBSL required for giving advertisementNotification or for cards promotion Customer Financial Transactions Reporting Act / Anti Money laundering Act requiresInformation reporting of suspicious cash transactions to CBSL and places KYC obligations on banks and financial institution
Regulatory Framework addressing Pre-paid risk in Bangladesh Bangladesh Payment and Settlement Systems Regulation,Applicable Laws 2009; Money Laundering Act, 2002; and Foreign Exchange Regulation Act, 1947Regulatory Scope Regulating and supervising of payment systems is operative in Bangladesh, including cross border transactions Recognizes Payment Service Providers (PSP) as new quasi financial entities and recognizes issuance of E-money, electronic fund transfer (EFT), Pre-paid Card For license PSPs may be required to maintain capital adequacy at levels specified by the Bangladesh Bank [Reg.4(vii)] Banks/Financial Institutions maintaining accounts with Bangladesh Bank for meeting Cash Reserve Requirement are exempted from obtaining license as PSP.
Regulatory Approach: One Size Does Not Fit All Proportionate and risk based regulations Low risk prepaid products with no cash redemptions may be exempted from license Fees should be designed keeping in mind the poor, unbanked and underserved community Semi-closed/open products may be exempted, subject to following a regular code of conduct Conditions for authorization should be pre-specified With regard to risk management, security and integrity - General Guidelines should be in place to be followed by all to ensure best practice
Exchange of Information between FIUsRatification and InformationImplementation Exchange in aof International Conventions AM Rapid manner L Build a Proper Comprehensive International and Efficient Co-operation Domestic Framework Capacity