Financial Crime World

Financial Inclusion through Money Services Businesses: A Balancing Act

In many developing countries, money services businesses (MSBs) play a crucial role in promoting financial inclusion. These businesses provide essential financial services to underserved populations, helping them access the formal economy and improve their socio-economic status.

Promoting Financial Inclusion

MSBs provide vital financial services, including:

  • Cash transactions
  • Cheque cashing
  • Money transfer services
  • Bill payment services
  • Other financial services

These services help individuals and businesses access the financial system, improving their economic stability and well-being.

Risk-Based Approach to Anti-Money Laundering and Combating Financing of Terrorism (AML/CFT)

For anti-money laundering and combating financing of terrorism purposes, it is vital that MSBs operate through financial institutions subject to proper supervision and regulation. This ensures that the overall risk of money laundering and terrorist financing in the financial system is reduced by bringing these customers into a regulated environment.

The Role of Money Services Businesses

MSBs refer to financial services that involve:

  • Acceptance of cash, cheques, monetary instruments, or other stores of value
  • Payment of a corresponding sum in cash or other form to a beneficiary
  • Transactions can involve one or more intermediaries and a final payment to a third party

Licensing and Regulation

In the Commonwealth of Dominica, MSBs are licensed by the Financial Services Unit (FSU) after satisfying the requirements of the Money Services Business Act, 2010. MSBs must be conducted by an entity established as a company in the country or a foreign company.

Duty of Vigilance

MSBs have a duty to:

  • Determine the true identity of customers
  • Recognize and report suspicious transactions
  • Keep records for a prescribed period
  • Establish internal controls
  • Train key staff

All employees are at risk of being involved in criminal activity if they fail to exercise vigilance.

Consequences of Failure

The consequences of failure in vigilance include:

  • Commercial damage, including reputational damage and loss of customers
  • Financial penalties
  • Criminal liability for directors, members, managers, or other senior officers of an MSB

Conclusion

While MSBs play a vital role in promoting financial inclusion in developing countries, it is essential that they operate within a regulated environment to mitigate the risk of money laundering and terrorist financing. By exercising vigilance and complying with AML/CFT regulations, MSBs can contribute to a safer and more stable financial system.