Money Laundering Concerns Surround E-Money and New Payment Products
A Growing Concern
A growing concern among financial regulators and law enforcement agencies is the potential for money laundering through electronic money (e-money) and new payment products and services (NPPSs). These innovative payment systems, which include prepaid cards, internet-based, and mobile-based payment services, have made it easier for individuals to transfer funds across borders quickly and anonymously.
Shell Companies and Corporate Service Providers: The Perfect Cover
The use of shell companies, which have no significant assets or operations, has been a well-documented means of facilitating money laundering. According to a 2011 World Bank report, 70% of grand corruption schemes involved shell companies. Europol’s Serious and Organised Crime Threat Assessment 2021 also highlighted the prevalence of business structures, including shell companies, in criminal networks.
Criminals use shell companies to disguise the transfer of illicit funds by engaging in real economic activity or mixing them with legitimate profits. They can achieve anonymity through complex company structures, nominees (individuals who act as owners, officers, and directors), and tax havens with strict secrecy laws.
Trust and Company Service Providers (TCSPs) play a crucial role in facilitating money laundering activities by providing services such as incorporation, registered office arrangements, bank account introductions, nominee services, and filing of company accounts. These companies often cater to high-risk clients and may not always follow anti-money laundering regulations.
Targeting Specific Customer Categories
To combat money laundering through e-money and NPPSs, financial institutions must focus on specific customer categories that are at higher risk. These include:
- High-net-worth individuals: Those with significant wealth and complex financial structures.
- Corporate clients: Companies with international transactions and complex supply chains.
- Non-face-to-face customers: Individuals who transact online or through mobile platforms without face-to-face interactions.
Financial institutions must implement robust customer due diligence, risk-based approaches to monitoring transactions, and ongoing surveillance to detect suspicious activities. Regulators must also ensure that TCSPs adhere to anti-money laundering regulations and that shell companies are not used as a means of facilitating money laundering.
Conclusion
The fight against money laundering requires cooperation among financial institutions, regulators, law enforcement agencies, and international organizations. By targeting high-risk customer categories and implementing effective measures to detect suspicious activities, we can mitigate the threat of money laundering through e-money and NPPSs.