Convergence of Telecom and Financial Services and Its Effects on AML/CFT Wire Remittance Operations (From Resource Material Series No. 71, P 24-31, 2007, Simon Cornell, ed. -- See NCJ-219452)

• NCJ Number: 219455
• Author(s): John Forbes
• Date Published: March 2007
• Length: 8 pages
• Sale Source: United Nations Asia and Far East Institute for the Prevention of Crime and Treatment of Offenders
• Publication Format: Book Chapter
• Publication Type: Issue Overview
• Language: English
• Country: Japan

Annotation

After reviewing a typical cash-based remittance money laundering drug operation, this paper examines how advances in and the spread of cashless digital financial transactions can both help and hinder techniques for countering money laundering.

Abstract

Money laundering has traditionally involved taking the proceeds of a cash-based criminal enterprise, such as dealing in illicit drugs, and funneling it into multitudes of legitimate businesses that produce legitimate and taxable income. Techniques for tracing and countering money laundering have been tailored to the tracing of these cash-based transactions; however, the convergence of advances in wireless telecommunications and people's desire to conduct rapid, inexpensive cashless transactions has spawned new systems for transferring cashless value units in paying debts and making purchases of goods and services. This paper describes how such as system is working in the Philippines. The Philippine Long Distance Telephone (PLDT), the largest telecommunications company in the Philippines was the parent company of Smart Telecoms, which established Smart Padala, a bank-based remittance system in conjunction with local bank Banco de Oro. The Philippine wireless value transfer system works well because there is a convergence of technologies (expanded use of wireless cell phones and the development of systems and users of digital financial transactions). Currently, such a system is not practical for money launderers due to the very small permitted amounts of value transfers ($200-$300) and the Philippines Anti-Money Laundering Council's regulation of the private sector's system of electronic value transfers. It is not likely that the wireless value transfer model will remain an exclusively Philippine model. Transfer amounts are also likely to increase, as are attempts to mask the identities of senders and recipients. This will likely increase the appeal of such systems for criminal enterprises and pose new challenges for combatting money laundering.