Financial services such as money remittance face a simple challenge: how to get money from A to B safely, securely and especially, without abuse of the system by criminals.
A sensitive example is Hawala – an informal money transfer system that originated in India and is now also used widely in the Horn of Africa, and across the Middle East and North Africa. Dominant features are its emphasis on personal trust, and that it operates at low cost outside the “conventional” banking system.
It’s both liberating for bona fide users and vulnerable to unscrupulous operators, including criminals generally, and terrorists and money launderers in particular.
Hawala: low-cost sustenance
The importance of the Hawala system cannot be overstated. It’s essential for many émigrés and migrant workers, enabling them to send money home at low cost and to people who may have no access to conventional banks.
To shut down Hawala is unthinkable and impracticable. But, as criminals continue to exploit its informality, there’s an urgent need to protect innocent users and clamp down on those who take advantage of its opaque nature.
Law enforcement agencies and tax authorities face real challenges in tracking informal movement of money and its legitimacy – a problem summarized below and explored in more detail by the Indian law firm Vaish Associates in an August article in Lexology*.
India’s response
Recognizing the problem is easy; finding a solution is harder. In India the government has become more diligent in tracking payments and taking action against illegal activity by informal money operators.
In parallel, there has been greater emphasis on holding financial institutions to account. Crucially, this includes the overlap between the formal and informal sectors – an increasing occurrence because usually at least one person in the informal chain will be using online banking.
Thus, every step (client onboarding, due diligence, and real time monitoring) grows in importance. For each one, digital services are the way to maximise effectiveness.
Specialist providers are the key to safe and effective provision
For financial institutions, and businesses with links to the informal sector, safeguards are essential. And services provided by independent specialists like Essiell Compli, being flexible and adaptable, are better suited to this niche than many provided by the big software brands.
In particular, Essiell Compli’s suite of cloud-based services, Compli, is precisely configurable to meet the unique requirements of each client. By delivering a digital ecosystem that fits comfortably with existing hardware, its comprehensive range of protections are easily accessible – including onboarding & KYC, due diligence, and compliance.
By using a ‘global person’ model to build whole profiles, and with continuous real-time monitoring, highly effective anti-money laundering provision eliminates the loopholes exploited by organized crime.
At the same time, Essiell Compli’s other services are also easy to use and cost-effective, so it’s win-win-win: greater security, increased efficiencies and lower costs. What’s not to like?
By Bjorn Larsson, CEO at Essiell Ltd, and Chairman of Essiell Compli.
* Hawala Transactions and Remittance Transfers: India’s Struggle with Illegal Money Flows
