E-money and other relevant technological developments : their contribution to the risk of money laundering and their impact on the regulatory regime

Abstract

There are a number of studies in relation to the traditional contributors of the risk of money laundering, however, relatively few about the risk posed by certain technological developments such as electronic money (e-money). In a world where developments in technology are always on the increase and new types of payment instruments are being introduced, it is imperative that regulators adopt a pro-active approach to identify and manage such risks as early as possible in order to effectively deter money laundering. This dissertation therefore seeks to identify the main vulnerabilities related to different types of e-money. The types of e-money analysed include prepaid cards which shall be discussed in Chapter 2, internet payment services and mobile money services which shall be discussed in Chapter 3, and digital currencies which shall be dealt with in Chapter 4. In addition, where such e-money services are offered in Malta, reference to such shall also be made. Chapter 5 shall then delve into a discussion on online gaming and its money laundering threats which, like e-money, is a service which has been brought about as a result of e-commerce, and is also very much associated to the use of e-money for the placing of online wagers. Moreover, this chapter shall also explore other technological developments which as opposed to developments such as e-money and online gaming, reduce the existing money laundering risks. Such developments include the provision of identification services by electronic data providers as well as automated anti-money laundering monitoring systems which increase the effectiveness of risk-based approach customer due diligence. The different types of e-money, as well as the other technological developments which include online gaming, electronic identification and risk-based anti-money laundering monitoring systems, shall also be discussed against the current regulatory backdrop, both at a European and local level. This regulatory backdrop shall be analysed in terms of its effectiveness to cater for such new risks and to encourage improvements in the area of customer due diligence through technology. Furthermore, suggestions shall also be made on how any identified regulatory exposures could be resolved or on how possible improvements can be realised.