World Bank demands tight rules on mobile cash

The World Bank has called for Central Bank regulation of telecommunication companies offering money transfer and mobile banking services — a move that could raise customer charges owing to increased compliance costs.

While recognising that mobile technology offers a chance for an estimated three billion low income earners to get access to financial services, the bank says that the line differentiating financial providers in the banking, telecom, credit card and mobile commerce has become increasingly blurred, yet no robust regulations to guard against money laundering have been passed.

“Distinctive risks concern observers in affected service markets,” said the World Bank. “These perceptions merit urgent attention because mobile financial service providers may fall outside anti-money laundering and combating the financing of terrorism controls generally adhered to by traditional financial institutions,” added the institution in a presentation made at a Citi Bank organised mobile money policy forum in Nairobi last month.

The bank says regulators and players in the industry need to identify perceived risks to avoid formulating laws that will put the sector into the trap of over-regulation.

“Non-bank providers of financial services, such as telcos should be considered as ‘Financial Institutions,’ as defined by the Financial Action Task Force (FATF).”

FATF is an inter-governmental body whose purpose is the development and promotion of national and international policies to combat money laundering and terrorism financing.

The Central Bank of Kenya (CBK) did not respond to our request for comment.

Speaking on Monday during the launch of a new internet based mobile money transfer system, CBK governor Prof Njuguna Ndung’u said the regulator “will continue to work with the ministry of finance and the financial sector regulators to promote a sound, safe, efficient and inclusive financial system with no room for regulatory arbitrage.”

Kenya is seen as a pioneer in the mobile phone money transfer services since its launch of M-Pesa in 2007.

All the four mobile phone service firms currently offer money transfer services, moving an average of Sh76 billion every month, and creating jobs for an estimated 39,449 agents as per CBK’s data.

“This reflects the fact that when cost of transactions decline, transactions increase in volume,” said Prof Ndung’u.

Under the World Bank proposal, mobile service providers would be put under two regulators, CBK and their present regulator, the Communications Commission of Kenya (CCK).

Although mobile service providers that offer money transfer service are currently subject to some level of regulation by the CBK, giving them financial institution status would increase their reporting compliance requirements.

“It is not necessary (considering mobile phone operators as financial institutions) because it is not our core business. We’re not a bank,” said Angela Ng’ang’a-Mumo, head of corporate communications at Telkom Kenya.

Ms Mumo said Telkom’s Orange money, which is run in partnership with Equity Bank, is already regulated by the CBK since it uses a banking platform.

Yu country manager Atul Chaturvedi said that while regulations differ from country to country, what is most important is the need to safeguard customers’ money and make sure that the transfer services are not abused.

If the proposal was to incur more costs, it would be a price that would be borne by consumers, he added

“We’ve not seen any misuse in Yu Cash and we do not think that there is great misuse in the sector,” said Mr Chaturvedi.

Owino Magana, a regional IT consultant said the regulations should be done harmoniously by both regulators and stakeholders who should also borrow from experiences in other countries.

jgachiri@ke.nationmedia.com

Source: Business Daily