Financial Crime World

Financial Inclusion: The Power of Money Services Businesses

In today’s world, financial inclusion is crucial for economic growth and development. Money Services Businesses (MSBs) play a vital role in bridging the gap between traditional financial institutions and underserved communities. Experts agree that MSBs are not only powerful enablers of financial inclusion but also significant contributors to the global economy.

Regulatory Framework

For Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) purposes, it is essential that financial products and services, including those provided by MSBs, are offered through financial institutions subject to proper supervision and regulation. This ensures that customers are brought into a regulated environment, thereby reducing the overall risk in the financial system.

Risk-Based Approach

A risk-based approach (RBA) to the provision of money services business may help foster greater financial inclusion, especially for low-income individuals who face difficulties accessing mainstream financial systems. On the other hand, an indiscriminate termination or restriction of business relationships with MSBs without proper risk assessment and mitigation measures could potentially increase financial exclusion.

Consequences of Failure

The consequences of failure in vigilance are severe, including commercial losses, damage to reputation, and even criminal prosecution. MSBs must perform their duty of vigilance by having systems in place to:

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

Licensing and Regulation

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

Duty of Vigilance

MSBs should have systems in place to perform their duty of vigilance. This includes:

  • Determining the true identity of customers
  • Recognizing and reporting suspicious transactions
  • Keeping records for the prescribed period
  • Establishing internal controls
  • Training key staff

All employees, especially key staff, are at risk of being involved in criminal activity if they are negligent in their vigilance.

Financial Inclusion and Development

In conclusion, MSBs play a vital role in promoting financial inclusion and development, particularly for low-income individuals who face difficulties accessing mainstream financial systems. However, it is essential that these businesses operate within a regulated environment to mitigate the risk of money laundering and terrorist financing. By doing so, MSBs can continue to be powerful enablers of financial inclusion and contribute to economic growth and development.

Key Takeaways

  • MSBs play a crucial role in promoting financial inclusion
  • A risk-based approach may help foster greater financial inclusion
  • Failure in vigilance can have severe consequences
  • Licensing and regulation are essential for MSBs
  • Duty of vigilance is crucial for MSBs to operate effectively