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Article
Publication date: 20 July 2010

Juni Gurung, Marcell Wijaya and Asha Rao

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Research limitations/implications

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.

Originality/value

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.

Details

Journal of Money Laundering Control, vol. 13 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

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Article
Publication date: 9 May 2008

Courtney J. Linn

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…

Abstract

Purpose

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.

Design/methodology/approach

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

Findings

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.

Originality/value

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.

Details

Journal of Money Laundering Control, vol. 11 no. 2
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 1 October 2018

Ehi Eric Esoimeme

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

Abstract

Purpose

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.

Design/methodology/approach

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

Findings

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”.

Research limitations/implications

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

Originality/value

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.

Details

Journal of Money Laundering Control, vol. 21 no. 4
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 1 January 2013

Angela S.M. Irwin, Jill Slay, Kim‐Kwang Raymond Choo and Lin Liu

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

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Article
Publication date: 1 January 2013

Jeffrey Simser

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

Abstract

Purpose

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

Design/methodology/approach

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

Findings

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

Research limitations/implications

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

Practical implications

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.

Originality/value

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

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Article
Publication date: 7 January 2014

Angela S.M. Irwin, Jill Slay, Kim-Kwang Raymond Choo and Lin Lui

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

Journal of Money Laundering Control, vol. 17 no. 1
Type: Research Article
ISSN: 1368-5201

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Article
Publication date: 3 July 2007

Dan Horne

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…

Abstract

Purpose

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.

Design/methodology/approach

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.

Findings

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.

Originality/value

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.

Details

Journal of Consumer Marketing, vol. 24 no. 4
Type: Research Article
ISSN: 0736-3761

Keywords

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Article
Publication date: 1 August 1994

Elizabeth M. Coyle‐Camp

Cashless payment systems are rapidly taking over from cash in corporatecatering and vending. As major organizations like British Nuclear Fuels(BNFL) and Manchester Airport…

Abstract

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.

Details

Facilities, vol. 12 no. 8
Type: Research Article
ISSN: 0263-2772

Keywords

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Article
Publication date: 1 February 1988

Edmond Alyanakian

The use of the Smartcard in Norway started with an experiment in Lillestrøm in September 1984. It was generally recognised as a success and in December 1986 the decision…

Abstract

The use of the Smartcard in Norway started with an experiment in Lillestrøm in September 1984. It was generally recognised as a success and in December 1986 the decision was taken to introduce the Smartcard on a nationwide basis. This is a summarised version of a paper given by Edmond Alyanakian to the International Retail Conference of the GDI, at Zurich recently.

Details

Retail and Distribution Management, vol. 16 no. 2
Type: Research Article
ISSN: 0307-2363

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Article
Publication date: 1 February 1996

James Backhouse

Smart cards are being toted as the secure means of payment for the future. But there are still some security and legal issues to resolve. This article evaluates current…

Abstract

Smart cards are being toted as the secure means of payment for the future. But there are still some security and legal issues to resolve. This article evaluates current security methods for smart cards and briefly reviews existing legislation related to their use.

Details

Journal of Financial Crime, vol. 3 no. 4
Type: Research Article
ISSN: 1359-0790

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