As digital technology has become better and cheaper, the cost of entry into the remittance, or money transfer, market has dropped. Currently, there are over 60,000 business operating in the UK remittance market. It’s competitive, but as remittance gets easier, the market also expands, so there’s still room for growth. The need for mainly migrant workers to send money home continues to be a significant contributor to economies worldwide.
A Simple Model Helps Millions of People
The model is straightforward, and the use of mobile apps means that there is no longer a need to go to a physical location to deposit money for the transfer. At its simplest, Person A in the UK pays money to their agent remittance service and the agent then sends it to their counterpart in the destination country, who pays it to Person B, the beneficiary.
It’s informal, and easy to use. But there are vulnerabilities, and it is up to the remittance service to reduce risks. None of this will be news to those who work in the sector, but it’s still worth considering afresh.
Risks Lurking in the Remittance Networks
Two of the most obvious dangers are money laundering and moving terrorist-destined funds across borders. And as financial crime can be all pervasive, remittance services can also be used to move money obtained through fraud.
Typically, the amount sent by one individual in any transaction will be relatively small. Criminals understand this. They can infect the system by using mules (people tricked or pressured into sending money on the criminal’s behalf) by or creating multiple fake identities to carry out many small transactions.
As most remittance services aren’t banks, the money travels via a bank. And banks, as regulated institutions, have a duty to monitor for suspicious activity. However, that may not solve the problem. It would be unusual for banks to identify individual transactions in this context. Instead, our provider will probably aggregate the day’s transactions into one payment.
It therefore falls to the remittance service – also regulated as a money service business – to do everything possible to prevent financial crime and, in the process, meet the requirements of regulatory compliance.
Keystones for effective compliance
While all regulatory requirements must be met, two aspects stand out: thorough and effective Know Your Customer (KYC) checks, and active transaction monitoring. KYC is fundamentally important. It should be more than a simple ID check, and should also include checking for stolen or re-sold information that could be used to create fake identities. Once KYC is completed, transaction monitoring comes into its own, but only if it’s comprehensive.
This is where only the best compliance services will do – one like Compli from Essiell Compli. Not only does Compli provide an impressively comprehensive service, but it takes full advantage of automation. With transaction monitoring, for example, Compli searches for unusual or suspicious behaviours which then trigger alerts for human intervention. Additionally, its customisable rules engine means processes can be fine-tuned to the needs of individual businesses. When combined with a “global person” concept (a profile built from multiple databases), the result is a cost effective service that delivers an exceptional level of protection – the quality that’s now essential to be compliant and to maintain the best possible reputation.
By Declan Morton, staff writer at Essiell Compli.
