Contents
New Payment Methods (NPMs)
The development of New Payment Methods (NPMs) has significantly altered the landscape of financial transactions.
This evolution has opened up new avenues for criminals to misuse these technologies for money laundering (ML) and terrorist financing (TF), leading to new criminal typologies and posing fresh challenges for law enforcement authorities.
Prepaid Cards (PPC)
The entities involved in the provision of prepaid cards, as mentioned in the text, include:
- Acquirer: Manages retailer relationships and provides infrastructure for card payments.
- Distributor (including retailer): Sells or arranges the sale of prepaid cards to consumers.
- Payments Network Operator: Offers the technical platform for transactions at ATMs or merchant points of sale.
- Issuer: Issues prepaid cards and handles customer claims for redemption or withdrawal.
- Programme Manager: Manages the prepaid card program, often in cooperation with a bank or electronic money institution.
- Agent: Any person providing prepaid card services on behalf of another entity in the provision chain.
Internet Payment Services (IPS)
Recent developments in Internet Payment Services (IPS) include:
- Diversification of Providers: IPS are offered by both financial institutions and non-financial firms. They can operate with or without a linked bank account.
- Types of Internet Payment Methods:
- Online Banking: Traditional banking services offered online by credit institutions, which is outside the scope of this document.
- Prepaid Internet Payment Products: Firms, not necessarily credit institutions, provide virtual, prepaid accounts for sending or receiving funds via the Internet.
- Digital Currencies: Customers purchase digital currency units or precious metals for exchange among account holders or conversion into real currencies.
- Growth of Prepaid Internet Payment Market: This market has grown, especially for person-to-person (P2P) transfers, driven by increased Internet usage and merchant acceptance.
- Virtual World Currencies: The emergence of electronic currencies linked to virtual worlds allows users to convert real currencies into virtual ones for in-world transactions. These currencies can be traded in the real world and converted into real currencies, extending beyond specific online games.
Internet-based payment services, emerging from the advent of e-commerce, encompass various types, including:
- Pre-funded Accounts: Enable transferring electronic money to individuals or businesses. Withdrawals can be to bank accounts, prepaid cards, or other transfer services.
- Digital Wallets and Currencies: Include digital representations of traditional or precious metal currencies, with exchanges often acting as virtual bureaus de change.
- Online Auction Payment Services: Use pre-funded accounts for auction payments, with or without recipient registration.
- Online Gambling and Virtual Worlds: Involve proprietary currencies for transactions within closed online environments.
- Closed Systems: Services issuing electronic money solely for specific issuer or merchant purchases, similar to closed-loop prepaid cards, are outside this paper’s scope.
Mobile Payment Services (MPS)
Recent developments in Mobile Payment Services (MPS) include:
- Mobile Financial Information Services: Offer account data viewing but no transaction capabilities, posing low risk.
- Mobile Bank and Securities Account Services: Similar to internet banking, these are tied to individual bank or securities accounts and are regulated and supervised.
- Mobile Payment Services: For non-bank account holders to make payments via mobile phones, often provided by non-traditional financial institutions with varying controls.
- Mobile Money Services: Allow storing value on phones, using credits as payment, but often fall outside regulation.
Entities involved in the provision of mobile payment services include:
- MNO (Mobile Network Operator): Provides the technical platform for accessing funds through mobile phones.
- Distributor (including Retailer): Sells or arranges the issuance of funds on behalf of the issuer for consumer payments, and may offer additional services such as technical support.
- Electronic Money Issuer: Issues electronic money, which is recorded as funds or value available to a consumer stored on a payment device, like chips on prepaid cards, mobile phones, or computer systems as non-traditional accounts with banking or non-banking entities.
New Payment Methods from AML/CTF perspective
As an obliged entity, it is essential to know which payment methods you should offer your customers and which you shouldn’t. Each of these payment methods comes with its own AML/CTF considerations, making it crucial for obliged entities to understand their features and potential risks.
Debit and Credit Cards
- Mastercard: Widely accepted with „Mastercard Secure Code“ for online security.
- Debit Mastercard: Immediate debit from the cardholder’s account.
- Maestro Card: Leading debit card system, often co-branded with girocard.
- VISA: Internationally accepted, with „Verified by Visa“ for online security.
- V PAY: Secure card used in Europe and globally, often co-branded with girocard.
- girocard: Widely used in Germany, compatible abroad through co-branding.
- Apple Pay: Mobile payment with NFC technology, usable with iPhone, Apple Watch, Mac, or iPad.
- Google Pay: Contactless payment for Android devices, with NFC technology.
- American Express: Global credit card with bonus programs.
- Diners Club: Offers exclusivity and benefits for cardholders.
- Discover: Major payment network in North America and other regions.
- JCB: Large credit card network from Japan.
- Union Pay: Chinese credit card organization, popular among Chinese travelers.
- DK (Dankort): Preferred in Denmark, often combined with Visa.
- CB: Primary payment system in France.
- e. bleue: Virtual debit card for secure online purchases.
Additional Payment Methods
- PayPal: Global payment platform with a vast user base.
- Amazon Pay: Allows Amazon customers to pay online using their Amazon accounts.
- giropay: German online banking payment system.
- SOFORT Überweisung: Direct transfer method based on online banking.
- SEPA Direct Debit: Enables collection of payments in euros across the SEPA region.
- POSTPAY: Deutsche Post’s digital wallet, integrated with DHL for delivery.
- MasterPass: Digital wallet storing payment cards and delivery addresses.
- Alipay: Leading online payment system in China.
- eps transfer: Austrian online banking-based payment system.
- iDEAL: Popular online payment method in the Netherlands.
- AcceptEmail: Bill payment via email using a secure transaction site.
- paysafecard: Online prepaid payment method.
- Skrill: Digital wallet for storing and using preferred payment methods.
Factoring
- BillPay: Offers payment by installment, with risk management and chargeback processing.
- Klarna: Allows customers to shop risk-free, paying after receiving goods.
Red Flags
- Discrepancies between customer-submitted information and monitoring system data.
- Individuals holding an unusual volume of NPM accounts with the same provider.
- Diverse and large funding sources for the same NPM account.
- Use of multiple reference bank accounts for funding.
- Third-party funding of accounts.
- Structured loading of prepaid cards just below reporting thresholds.
- Rapid ATM withdrawals following account funding.
- Use of NPM accounts only for withdrawals, not for purchases.
- Atypical product use, such as unexpected cross-border transactions.
- Large number of bank accounts held by a single prepaid card company in different countries.
- Unexplained movement of funds between accounts held by different prepaid card companies.
Sources:
https://www.fatf-gafi.org/en/publications/Methodsandtrends/Reportonnewpaymentmethods.html
https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Rba-money-or-value-transfer.html
https://www.fatf-gafi.org/en/publications/Fatfrecommendations/Rba-npps-2013.html