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The purpose of this paper is to explore the possibility of effectively enforcing the Anti‐money Laundering and Counter Terrorism Financing (AMLCTF) Act compliance on prepaid card small and medium enterprises (SMEs). Currently, certain types of prepaid cards providers are exempt from compliance. This paper looks at this situation bearing in mind the necessity of keeping regulation manageable for SMEs.

The paper adopts the case study approach facilitated by an online search of different prepaid card vendors. Using this as a basis, a feasibility analysis of the AMLCTF Act is conducted for prepaid card SMEs.

It is found that not all regulation compliance requirements are applicable to SMEs. Regulation enforcement without considering the capabilities of the regulated entities will only increase avoidance. It is also found that the AMLCTF Act does not effectively address the issue of prepaid cards' vulnerability to money laundering and terrorism financing (ML/TF) illustrated by exclusion of prepaid cards that cannot be used to withdraw money from the compliance. Given that there are records of such cards been exploited for illegal trading, Australian Transactions Reports Analysis Centre appears not to be up to date with the ongoing trend in ML/TF around the world.

Limitations of case study research methodology apply. Also, the prepaid card vendor information is based on an online search of their web sites and did not involve in‐person interactions to gather the information.

This is the first paper in anti‐money laundering literature that has considered SMEs and attempted to look into the AMLCTF Act compliance requirements' applicability for them. It is believed that the case study can facilitate further research related to regulation enforcement issues for SMEs.

The term “prepaid card” refers to the pre‐payment of value process, i.e. pay now and extract value later, and describes most of the prepaid/stored value products available today. These cards have largely supplanted paper gift certificates and travelers checks, and are used as alternatives for traditional paper‐based transactions such as payroll payments, cross‐border remittances, and government assistance or welfare benefit programs. However, the same attributes that make open‐system prepaid cards attractive to legitimate customers make them attractive to money launderers. The purpose of this paper is to make the case for subjecting certain prepaid card products (but not all) to Report of International Transportation of Currency or Monetary Instruments (CMIR) requirements.

Addresses how the US law‐enforcement agencies might reconstruct the CMIR enforcement regime to address the unique challenges that prepaid card products present.

The money laundering threat posed by these products is not immediate, but it is not conjectural either. US law‐enforcement agencies (and perhaps ultimately the courts) will be required to address the fourth amendment and privacy issues that may arise when a customs officer “searches” a prepaid card by swiping it and ascertaining the value of the funds associated with that card.

The paper is of value by showing that problem issues can be surmounted, provided the enforcement regime is narrowly targeted to include only those prepaid card products that bear the closest resemblance to currency, and provided the funds associated with those products are maintained in pooled accounts.

This paper aims to compare the prepaid card laws/regulations in Nigeria, the UK, the USA and India with the aim of determining the best approach to regulating prepaid cards, that is the approach that promotes financial inclusion and also makes the product less attractive for money laundering.

This paper relies mainly on primary and secondary data drawn from the public domain. It also relies on documentary research.

This paper makes the following findings and recommendations: Nigeria has the best approach to regulating providers of prepaid cards. Nigeria’s approach could foster financial inclusion and at the same time mitigate the money laundering risks associated with prepaid cards. Nigeria’s approach is not too strict like the Indian approach and it is not too relaxed like the UK and the USA approach. Operators, including mobile/telecommunications operators, wishing to operate money transfer schemes in Nigeria are allowed to do so with approval from the Central Bank of Nigeria and in strict conjunction with licensed deposit-taking banks or financial institutions. The UK, the USA and India are recommended to adopt Nigeria’s approach. The UK and the USA have the best approach to regulating agents of prepaid cards. Both countries require prepaid card providers to maintain a current list of agents and make it available to the relevant authorities upon request. The approach allows regulatory agencies to effectively monitor and supervise prepaid card agents. India and Nigeria are advised to clarify their approach regarding the regulation of prepaid card agents. The prepaid card laws/regulations of those countries should be modified to specify if the agent of a prepaid card provider is required to be licensed or registered by a competent authority or if the prepaid card provider (the principal) is required to maintain an updated list of agents which must be made accessible to a designated competent authority, when requested. The new changes will afford regulatory authorities the opportunity to effectively monitor and supervise prepaid card agents. India’s approach to thresholds would preclude most individuals in the intended target market from accessing basic financial products, as most people typically do not have residential addresses that could be confirmed by reference to formal documentation. India should adopt the “risk-based approach” and not the “wholesale de-risking approach”.

Given their low-risk characteristics, closed-loop cards, specifically cards which do not allow reloads or withdrawals, remain outside the scope of this paper.

Although there have been researchers who adopted the comparative approach like Jean J Luyat and Will Cain, the comparative approach adopted by those researchers was not detailed enough and also was not aimed at seeking to answer the research question in Section 1 of this paper. Both writers focused on only the aspect of financial inclusion making the whole research a one-sided approach. Jean J Luyat focused on “how regulation had an impact on the development of prepaid cards in Japan and Europe”. He was able to discover that prepaid cards were growing rapidly in Japan but not gaining acceptance as a payment method in the European Union (EU) and France. He aligned such growth in Japan to different factors including regulation. He stated that Japan had a simple and flexible regulatory framework compared to the EU and France which have a complex regulatory system with strict prudential requirements. Nothing was said about the money laundering aspect of such regulation and neither was anything said about thresholds and other optional recommendations canvased by the Financial Action Task Force. The Electronic Money Directive referred to by Jean J Luyat has already been repealed and a second Electronic Money Directive is in place. A comparative approach is adopted in this research seeking to compare the approach in Nigeria with that of the UK, the USA and India. Each of these countries adopted different approaches. The results are to help answer the research question in Section 1 of this paper. The countries were selected on the basis of how strict their regulatory regime is. India’s regulatory regime is the strictest while the UK and the USA are the most lenient. Nigeria is caught in between strict/lenient.

This study examines the relationship between prepaid debit card use and the intention to open a bank account within twelve months. The Transtheoretical Model (TTM) of Behavior Change helped to conceptualize one's stage in the process of changing from unbanked status if desired. The Theory of Planned Behavior (TPB) provided a framework to examine factors that influence banking intention. Prepaid debit card use is considered a social norm as it is a popular alternative to banking, and these accounts have increasingly mimicked bank account features in recent years.

Three in-depth focus group interviews with low-income respondents were first conducted in 2012, which revealed a prolific use of prepaid debit cards. Most participants had previous banking history, and despite negative experiences, some requested information about banking terms and “free” banking. These themes and previous studies informed a TPB-based biprobit model, which was estimated using data of an unbanked sample from 2013, 2015 and 2017 waves of the US Survey of Unbanked and Underbanked Households.

Though there was banking interest in the focus groups, no significant empirical association was found between recent prepaid debit card use and banking intention. Going deeper with another sample, we found that current cardholders were equally likely to have become recently banked or to be long-term unbanked but less likely to be long-term banked. Also, factors such as a more recent relationship with banks, use of other alternative financial services for transactions and credit, smartphone ownership, and trust increase banking intention.

The main limitation of the study is the cross-section quantitative data. Future research may track banking status over time, particularly as financial technology (fintech) evolves with alternatives that may influence banks and customers to adapt.

To compete with “leapfrog” fintech banking alternatives, bank managers should consider utilizing customer segmentation to target “at-risk” customers and former customers with products and terms tailored to meet their banking needs. Banks can also tailor digital products to capture markets in banking desserts through mobile phones.

This mixed-methods study is unique in that it builds on insights from earlier in-depth interviews with real unbanked groups to examine a trend in prepaid debit card use and the impact on banking interest.

Financial inclusion is measured by the number of people who use the formal financial system and banks in particular. Limited access to formal banking services and the existence of unbanked households is a main policy concern. The authors evaluate how the use of prepaid (reloadable) debit cards by unbanked households affects financial inclusion and specifically the potential for these households to participate in the formal financial system and open a bank account.

The authors apply matching models to analyze survey data from the Federal Deposit Insurance Corporation National Survey of the Unbanked and Underbanked Households from 2009 to 2019 and evaluate how prepaid cards use affects plans to open a bank account.

Unbanked households who use prepaid cards are 5% less likely to open a bank account compared to the matched nonusers of prepaid cards. In addition, prepaid card users are 12% more likely to use nonbanks to transfer money/transact online and 18% more likely to have obtained loans from alternative financial services providers compared to the matched unbanked nonusers of prepaid debit cards.

No previous work has estimated the causal impact of use of prepaid cards on financial inclusion.

The purpose of this paper is to examine the identity and payment method verification procedures implemented by a number of popular massively multiplayer online games (MMOGs) and online financial service providers (OFSPs) to determine if the systems they currently have in place are sufficient to uncover the identities of those who may wish to use such environments to conduct money laundering or terrorism financing activity.

The paper investigates whether the payment instruments or methods used by account holders to place funds into their account(s) hinder or assist investigators to expose the real‐world identity of the account holder. The paper then discusses whether it is feasible and/or desirable to introduce know your customer (KYC) and customer due diligence (CDD) legislation into virtual environments and illustrates an effective KYC approach which may assist MMOGs and OFSPs to correctly identify their account holders, should legislation be put in place.

The systems currently in place by all of the MMOGs investigated are wholly inadequate to successfully establish the real‐world identities of account holders. None of the information required at the account setup stage is verified and, therefore, cannot be reliably associated with an account holder in a real‐world context. It appears that all three of the MMOGs investigated are leaving the serious matter of identity and payment method verification to the organisations that assist in the sale and purchase of their in‐world currency such as third party currency exchanges and Internet payment systems (collectively referred to as OFSPs). However, many of these OFSPs do not have adequate systems in place to successfully verify the identities of their account holders or users either. The authors' experiments show that it can be a very simple process to open accounts and perform financial transactions with all of the OFSPs investigated using publicly available or fictitious identity information and a prepaid Visa® gift card. Although all five OFSPs investigated in this research claim to verify the identity of their account holders, and may already be subject to KYC and CDD legislation, their systems may need some work to ensure that an account holder or user is accurately identified before financial transactions can take place.

The authors believe that the electronic KYC approach discussed in this paper deals effectively with the challenges of global reach, anonymity and non‐face‐to‐face business relationships experienced by virtual environment operators, thereby assisting in the effective detection and possible prosecution of individuals who wish to use these platforms for illicit and illegal purposes.

The purpose of this paper is to explore typologies as well as emerging trends and threats in money laundering.

Recent trends and emerging threats in money laundering are discussed, both in terms of predicate activities (drugs, fraud) and in terms of techniques/typologies.

It is found that the challenges and risks posed by money laundering to financial systems and to the rule of law persist.

Understanding evolving and emerging typologies and techniques is necessary to address money laundering challenges.

Considerable resources are applied by regulators and the regulated to anti‐money laundering systems; this paper provides a measure by which the robustness of those systems can be examined.

This paper provides a succinct but comprehensive overview of the current state of money laundering, as well as a look at emerging threats.

There is a clear consensus of opinion that virtual environments and virtual currencies pose a money laundering and terrorism financing threat. What is less clear, however, is the level of risk that they pose. This paper aims to clarify the suitability of virtual environments for conducting money laundering and terrorism financing activities.

A number of experiments were conducted to estimate the quantity of funds that could be moved through these environments. These experiments took into account a number of factors such as the number of accounts that would need to be opened to launder/raise a specific amount of funds, the amount of funds that could be placed within a certain timeframe and the transaction limits imposed by each of the massively multiplayer online games and online financial service providers involved in the money laundering and terrorism financing scenarios.

The findings of this research show that money laundering and terrorism financing can take place inside virtual environments. Virtual money laundering and terrorism financing offer high levels of anonymity, potentially low levels of detection, and remove many of the risks associated with real-world money laundering and terrorism financing activity. However, this comes at the cost of ease, time and, in some cases, the amount of funds laundered. Large sums (millions of dollars) can be laundered in virtual environments, but this exponentially increases the level of effort involved in setting up accounts and placing, layering and integrating funds.

A number of authors have described potential virtual money laundering scenarios, but some of these are out-of-date due to closed loopholes, all are rudimentary and make no attempt to discuss the practicality or feasibility of using these scenarios. This research addresses those issues.

The purpose of this paper is to demonstrate how the “money for nothing” attitude about gift card non‐redemption, that pervades retailing, directly conflicts with a customer focus. Further, it aims to show how short‐term financial benefits are completely offset by long‐term increases in indirect costs and damage to brand equity.

The paper uses examples of behavior to demonstrate common attitudes of practitioners revolving around gift card issuing and redemption. Additionally, the use of simple case study brings into question the common assumptions about the short‐ and long‐term effect on organizational performance of non‐consumer‐centric policies.

The paper finds that claims that retailers get “money for nothing” on unredeemed gift cards are illusionary. The actual costs of non‐redemption are quite high because the retailer misses the opportunity to bring both existing and, importantly, new customers into the retail environment. Further, brand equity may suffer if consumers feel that retailers have taken advantage of them. Brand equity damage can grow exponentially if media and governmental interests step into the fray.

The real issue is whether retailers pay lip‐service to their gift card‐holding public or really embrace the potential value that a gift card‐holding customer generates. Long‐term benefits accrue to organizations that reject the “money for nothing” mentality and actively try to attract gift card shoppers.

Cashless payment systems are rapidly taking over from cash in corporate catering and vending. As major organizations like British Nuclear Fuels (BNFL) and Manchester Airport have discovered, the removal of on‐site cash handling systems can produce significant operational savings and better service efficiencies. Reviews the cashless payments market and the cost of cash management systems. Examines card applications solutions at BNFL and Manchester Airport and typical system functions. Reviews cashless system functions, card technologies and “contactless” smart card systems in loyalty schemes. Looks at system integration costs and multi‐application “one‐stop” card systems.