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SVF Licensees Must Implement Effective AML/CFT Systems
In a move to combat money laundering and terrorist financing, SVF (Stored Value Facility) licensees are required to implement robust Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) systems. This is in line with international standards and best practices.
Risk-Based Approach Crucial
The risk-based approach (RBA) is central to the effective implementation of an AML/CFT regime. SVF licensees must allocate their resources more effectively and apply preventive measures that are commensurate with the nature and level of risks. This allows them to focus their efforts in the most effective way.
Identifying and Assessing ML/TF Risks
To identify and assess ML/TF (Money Laundering/Terrorist Financing) risks, SVF licensees must conduct an assessment at both the institutional and customer levels. This involves identifying risk factors that can differ significantly from one payment product or service to another.
SVF Products Vulnerable to ML/TF Risks
SVF products, such as stored value payment cards, online stored value payment facilities, mobile payment services, and internet payment services, are vulnerable to similar ML/TF risks as other retail payment products. Unless adequate AML/CFT policies, procedures, and controls are applied, unacceptable ML/TF risks may arise.
Factors That Reduce Attractiveness of SVF for Money Laundering
Several factors reduce the attractiveness of SVF for money laundering when compared with cash:
- Limited product design to small payments.
- Payments made through SVF products are a more accountable means of transferring money.
- SVF products generally provide an electronic trail that can be used to locate and identify the user.
Risk Factors
The risk of an SVF product depends on its design, functions, and mitigating measures applied. Risk factors include:
- Maximum stored value or transaction amount of the SVF.
- Methods of funding (e.g., cash, unverified parties).
- Cross-border usage.
- Person-to-person fund transfer function.
- Cash withdrawal function.
- Holding of multiple accounts/cards.
- Multiple cards linked to the same account.
- Payment for high-risk activities.
Risk Mitigating Measures
The ML/TF risks of an SVF product can be reduced by implementing risk mitigating measures, including:
- Applying limits on maximum storage values, cumulative turnover, or transaction amounts.
- Disallowing higher risk funding sources.
- Restricting the SVF product for higher-risk activities.
- Restricting higher-risk functions such as cash access.
- Implementing measures to detect multiple SVF accounts/cards held by the same customer or group of customers.
Customer Risk Assessment
SVF licensees must assess whether a business relationship presents a higher ML/TF risk and assign a ML/TF risk rating. The customer risk assessment will be based on information collected during the identification stage.
By implementing effective AML/CFT systems, SVF licensees can reduce the risk of money laundering and terrorist financing, while also maintaining compliance with international standards and best practices.