Impact of Mobile Money on Financial Crime, Money Laundering, and Terrorism Financing

Impact of Mobile Money on Financial Crime, Money Laundering, and Terrorism Financing

Gilbert Ouko Oyoo (Independent Researcher, Kenya)
Copyright: © 2020 |Pages: 18
DOI: 10.4018/978-1-7998-2398-8.ch010

Abstract

Financial crime, money laundering, and terror financing have been perennial menaces that downplay the major headway made in the financial transaction space. Businesses and individuals have found it prudent to always try remaining ahead of the perpetrators behind the vices. The springing into life of the mobile money in the second half of the first decade of this century has revolutionized the manner with which risk management in this respect is handled. In this chapter, the author posits that although mobile money has led to greater financial inclusion, the rate with which the myriad financial crimes have been reported over the past decade in the face of this phenomenon raises the need to stay abreast of developments in this space.
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Overview

Financial crime, money laundering and terror financing have been perennial menaces which have sort to downplay major headways made in the financial transaction space (Solin & Zerzan, 2010). Businesses and individuals have found it prudent to always try remaining ahead of the perpetrators behind the vices. The springing into life of the mobile money in the second half of the first decade of this century has revolutionized the manner with which risk management in this respect is handled. However, though Castri (2013) noted that mobile money has reduced the risk of money laundering, the rate with which the myriad of financial crimes have been reported over the past decade in the face of this phenomenon raises the need to stay abreast of developments in this space.

In the emerging economies such as Ghana, Kenya, Tanzania, Nigeria, India, Uganda, Zambia and Argentina, mobile money has proved to be highly popular. This has been expedited by the huge unbanked population that, with an integral access to mobile gadgets, finds it easier and more convenient to make use of mobile money as an alternative to effecting financial transactions (Akomea-Frimpong et. al., 2018). As such, the traditional banking services provides have been left with a few reserve roles, less robust as they initially used to be. In Kenya, for instance, 44 per cent of the Gross Domestic Product (GDP) was represented by the value of the total mobile money transactions in 2018 (Munda, 2019). That implies that nearly half of the Kenya population is increasingly using the mobile platforms to initiate and complete corporate and retail transactions. In Ghana, with its largest Telco –Mobile Telecommunications Network (MTN) having over a 14 million subscriber base, mobile money can be seen to be the main platform that most of the unbanked in the West Africa nation get to join the formal banking system. As a matter of fact, PwC, 2015 asserts that over 80 per cent of the Ghanaian population has no access to the formal financial services.

Since it was embraced for wide use by commercial players and for person-to-person transfers, mobile money has been applauded for the efficiency it brought of facilitating fast and effective completion of payments between businesses, banks and consumers (Mirfin, 2019). Notably too, it mitigated the risk of carrying hard cash. As Castri (2013) confirms, individuals can now load their money into their mobile money transfer platforms and not feel the fear of being physically stolen from by sneak thieves and muggers. Further, the mobile money has not only expedited local funds transfers for the emerging economies but also international remittance, thanks to established players such as Apple Pay and PayPal joining the bandwagon (Mirfin, 2019). As such, customer experience has become very convenient with the use of mobile money, businesses have realized notable reduction in expenses and reduced paperwork and associated costs with regard to making and receiving payments, tremendously improved cash flows with swift payments, and enhanced the access to actionable data for clients that is stored in the applications (Castri, 2013).

Alongside this robust improvement in payment and money transfers has come one of the most covert yet pernicious manifestations of financial crime in our time. While the traditional criminal ways of fraud could not thrive with the mobile money tool, the criminals have equally adapted new tricks presented by changing technology and communications (Ghanaweb, 2019). GhanaWeb (2019) further observes that with the highly secured modes of mobile money transfers through the internet that has revolutionised business delivery processes, mobile money has created new avenues and opportunities for tech savvy criminals to defraud unsuspecting users. Identity theft, internet fraud and credit detail thefts all of which manifest as cybercrime, have stealthily crept into the mobile money platforms creating a huge risk of financial crime than what has been seen before. Money laundering, especially across countries has found a steady anchorage on this platform, calling for a deeper and a more intrinsically robust level of scrutiny to restrain (Kersop, 2016).

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