Mobile phone technology is one of the most interesting trends today, not only for individual consumers but also for businesses. It has driven technological growth and innovation, contributing to the ease and speed of personal communications, as well as transforming the way we see and use money. Its societal impact has been ground-breaking.
Being specialists in the payments analytics sector, we come across loopholes that exist within payment systems and models, especially in relation to financial crime compliance. The drive and innovation created by Fintech's to facilitate payments with speed and ease are often the very methods criminals use to exploit payment systems for their illicit gains. As with all types of technological innovation, criminals consistently strive to find a flaw or a way to circumvent the controls organisations put up to guard against manipulation and so although, the innovation provides the customer with speed and ease to carry out their desired financial transactions, the opportunities it presents to criminals cannot be underestimated. So yes, it is true that technology-driven innovation has transformed the way we see money and use money.
Mobile money as a solution to financial inclusion
For the purposes of this report, it is important to establish the difference between 'mobile banking' and 'mobile payments'. Mobile banking is a service that operates outside the confines of traditional banking infrastructures such as the physical branches, the use of ATMs, distributors by digitising some of these services. In contrast, mobile payments, can be simply described as the initiation of payments using mobile phones. Mobile payments have the potential to expand the financial access to the unbanked and the underbanked even in the most remote areas by reducing transaction costs and increasing accessibility of financial services. Mobile money is the digitisation of financial services that allows consumers to store, send and receive money on a basic mobile phone, without the need for a bank account.
Recent travels to Ghana, a developing country on the west coast of Africa, granted me a broader insight in to how mobile money platforms are promoting financial inclusion even in the most rural areas. As the use of mobile money and mobile wallets are on a steady rise, Ghana has become a fertile ground for digital innovation and while we are interested in its mobile payments landscape in depth, we are particularly interested in looking at the controls in place to mitigate crime risks such as consumer fraud, money laundering as well as the controls in place to minimise the manipulation of this payment platform against other forms of financial crime.
With mobile money agents littered across almost every street corner, they appeal to consumers who would like to send money to their relatives across townships and across regions. Speaking to Fred Asumanu of Financial Inclusion Africa, he noted that one of the reasons the use of mobile money had gained popularity was because of the urban-rural divide across the country. As many Ghanaians move from rural areas to urban areas in a search of jobs, they hope to send money back to their family and friends in rural areas. The fees and charges for money transfers are significantly less than the cost of boarding public transport to deliver cash to family, and so the service provides a tangible resolution. Financial Inclusion Africa, is a group of young professionals across financial services, Fintech's, telecommunication businesses who are passionate about promoting solutions to financial inclusion in Ghana and across Africa. For them, they see the accessibility of mobile money across the continent as the creation of financial inclusion and as a cause that provides an alternative to cash, credit cards and debit cards.
The first platform of this kind was the M-Pesa, introduced by Kenyan company Safaricom in 2007 where Vodafone was a minority shareholder. Two years later, mobile service provider, MTN Ghana, established its first mobile money platform which was known as 'MTN Mobile Money'. At the time the World Bank estimated 70% of Ghana's population to be unbanked with only 35% of the population owning a mobile phone. With the above figures, it would have been easy to underestimate the impact of the mobile money service in Ghana but as of June 2016, figures published by the central Bank of Ghana, showed that mobile money transactions had increased 20% since the end of 2015, reaching $177.9 million. The service has since been established by almost all mobile service providers in Ghana with the likes of Airtel Money and Tigo Cash, offering a competitive edge for this value-added service which provides Ghanaians with an alternative to cash transactions.
The Ghanaian equivalent to the M-Pesa service was launched in Ghana in September 2015 but it is known as 'Vodafone Cash'. At present, Vodafone Cash can be used to send and receive money, top up airtime for self and other Vodafone users, pay bills (Vodafone Bills) as well as buy goods and services. Ghana has always been a very cash-intensive economy and so these financial technologies aid its progress towards a cashless society and financial inclusion. How then can financial inclusion be measured outside official statistics? When financial services such as savings accounts, applying for loans, bill payments and insurance facilities are accessible at an affordable cost to everyone in a society, regardless of his or her economic status, such a society can be said to have achieved financial inclusion. Presently, the mobile money service in Ghana facilitates bill payments, insurance payment services, savings account with the option of facilitating loans being currently explored.
As the mobile payments system depicts in Ghana, it would not be out of line to then suggest that a SIM card in Ghana is almost equivalent to having a bank account. This is because every SIM card can be linked to a mobile money service and so the Electronics Communications Act of 2016 now requires every SIM purchase to be registered to the user of the SIM. As such, all Mobile Network Operators (MNOs) and their agents can only sell SIM cards on the presentation of proper valid ID cards. A valid form of ID can either be a valid passport or a Ghanaian national identity card.
From a regulatory perspective, the mobile money service exists as an intersection of telecommunications and finance. In Ghana, MNOs are regulated by the National Communications Authority (NCA) which is responsible for issuing the license for MNOs to carry out their communications business. As mobile phones have evolved to facilitate a variety of communication methods including financial services, any MNO that operates a mobile money service is also regulated by the central Bank of Ghana which focuses largely on consumer protection and the implementation of policies to drive growth. So, although mobile money providers are dual regulated by both the NCA and the Central Bank, its system is a bank-led model. This means the central bank drives the service and does so as a path to financial inclusion.
Mobile money services are typically offered from a bank to the mobile money account holders’ through a network of agents. Agents approval are done by MNO’s who are also responsible for providing its agents with mandatory training and regulatory refresher training. Fundamentally, the Bank of Ghana sets out the KYC and AML requirements that must be adhered to by MNOs and its mobile money agents. In trying to support innovative ways of achieving financial inclusion across the country, the Bank of Ghana also deems it necessary to regulate and protect against financial frauds and maintain financial stability.
As impressive as the mobile evolution sounds, from a financial crime perspective, so many questions spring to mind. For example, does the mobile money platform in Ghana pave way for authorities to trace the perpetrators of financial crimes who manipulate this system? Like conventional bank accounts, can mobile money accounts be frozen for investigation? If these are indeed some of the existing legal limitations, how will regulating this area mitigate the risks it currently presents?
Speaking to an executive at Ghana’s Economic and Organised Crime Office (EOCO), he mentioned that the EOCO had encountered many investigations of frauds and financial crimes that occurred as a result of the manipulation of the mobile money platform. The EOCO is responsible for monitoring and investigating economic and organised crime and on the authority of the Attorney General. With mobile money services on the rise in Ghana, he mentioned that fraudsters were veering away from opening bank accounts as they know investigative agencies like the EOCO and the Financial Intelligence Centre (FIC) could obtain a mandate to freeze suspicious accounts for investigations. Secondly, the banks and financial institutions have a legal obligation to report any suspicious transactions by submitting a suspicious transaction report (STR) to the FIC. This onus certainly does not lie on mobile money agents; however the Payments Systems and Services Bill 2016 requires MNOs “to have in place systems and control mechanisms that detect the pattern on transactions and detect suspicious transaction”.
With regards to tracing those who commit financial crimes using this platform, the KYC information stored upon SIM card registration is what is relied upon. A two-tier system also exists in the sense that, upon registration for mobile money services, the applicant must go to their MNO office or a mobile money agent to verify their identity with a valid form of ID.
As the mobile money service heavily relies on cash – cash on presentation of crediting the e-wallet account and cash on withdrawal of funds from e-wallet, the money laundering controls stipulated by the central bank has also been divided depending on the level of KYC information held on the customer. Customers are grouped in to 1) those who provide minimum KYC information; 2) those who provide medium KYC information; and lastly, 3) those who provide enhanced KYC information. Therefore, if only minimum KYC information is held on a customer, they can only maintain a maximum e-wallet balance of 1000 Ghana cedis which is approximately £200. In addition to this they can only make a maximum mobile money transfer of 300 Ghana cedi (approximately £60). As the approach suggests, the more KYC information is held on a customer, the higher their e-wallet limit and the higher their daily transaction limit. Will these limits ever prevent money laundering? Certainly not! But they can mitigate the risks of the platform being used to launder large amounts of cash.
In conclusion, I recognise and appreciate the vision of mobile money services in Ghana. On my previous visits to Ghana, I wondered why internet shopping had not taken off, why ApplePay did not work there, why I could not set up a direct debit to pay my Spotify music account; very often forgetting that the financial landscape is completely different from the developed world. The methods used to create financial inclusion and a cashless system in the developed world, for example, could never be emulated in Ghana as over half of the population is unbanked. However, technology has paved the way for innovation and now Ghana and the rest of Africa can rise and set its own standards and its own pace on how to achieve financial inclusion. Technologically, Ghana has risen to the occasion with the help of MNO’s and Fintech’s, seeing and ceasing the opportunity to digitise a cash-intensive economy. Today, through mobile money services, insurance premiums can now be taken monthly from an e-wallet, powered by a basic mobile phone. The digital future for Ghana has never looked this exciting!