Prepaid cards asia 2010

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Easy to get & use -Availability• Card-holder/buyer

anonymity• Credit checks not

required• Evidence of

identification may not be required

Easy to get & use -Availability• Card-holder/buyer

anonymity• Credit checks not

required• Evidence of

identification may not be required

Convenient• Can be

purchased, reloaded (for Open & Semi-open), redeemed and refunded at conveniently located merchants e.g. supermarkets

Convenient• Can be

purchased, reloaded (for Open & Semi-open), redeemed and refunded at conveniently located merchants e.g. supermarkets

Affordable• Funds are

immediately available

• Often at lower cost then when using traditional banking services

Affordable• Funds are

immediately available

• Often at lower cost then when using traditional banking services

Reduced overdraft risk• Reduces risk of

overdraft• Allows nearly

immediate liquidity to users

Reduced overdraft risk• Reduces risk of

overdraft• Allows nearly

immediate liquidity to users

Benefits of using Pre-paid/Stored Value Cards:

FATF definition of ‘Money Laundering’ -

“the processing of…criminal proceeds to disguise their illegal origin” in order to “legitimize” the ill-gotten gains of crime.

FATF, ‘What is money laundering?, Basic Facts About Money Laundering’, at http://www.fatf-gafi. org/MLaundering_en.htm.

Attn : Pls place graphic• Process through which illegal funds or

assets are introduced into the financial system or converted into monetary instruments

PlacementPlacement

• Process through which illegal origins of placed funds are disguisedLayeringLayering

• Process through which disguised/layered funds are made available for investment in legitimate or illegitimate business

IntegrationIntegration

Typically, Money-laundering is segmented into 3 stages:

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• Easy to acquire;• Bank account not

required;• Accepted online, via

fax or through non-financial outlets;

• May not require face-to-face verification

• Easy to acquire;• Bank account not

required;• Accepted online, via

fax or through non-financial outlets;

• May not require face-to-face verification

PLACEMENT

• Value is either:• redeemed (Closed

or Semi-closed Cards), or

• sent overseas

• Value is either:• redeemed (Closed

or Semi-closed Cards), or

• sent overseas

LAYERING• can be used as a

means of payment by criminals;

• can be used to make payment for services rendered

• can be used as a means of payment by criminals;

• can be used to make payment for services rendered

INTIGRATION

MoneyMoney--Laundering Process through PreLaundering Process through Pre--paid/SVC paid/SVC Usage:Usage:

Electronic MoneyTwo categories of E-money in Singapore -

Single Purpose & Multiple Purpose Stored Value

SPSVCs – only to pay for goods/services of issuerMPSVCs- to pay for goods/services of other merchants

MPSVFswho can issue

• The Banking Act (s.77A) allows only banks authorizedby Monetary Authority of Singapore to issue MPSVCs;• Payment System (Oversight) Act 2006 (s.33) allowsany entity/person to issue MPSVCs with stored valuesbelow S$30 million;• SPSVCs may be issued by any entity.

Regulatory Framework addressing Pre-paid risk in Singapore

Pre-paid payment instruments

Pre-paid payment instruments facilitate purchase of goods and services against the value stored on such

instruments - smart cards, magnetic cards, m-wallets

Types Closed system, Semi-closed system, Semi-open system

and Open system

Who can issueBanks and NBFCs can issue Open System Cards, subject to approval from RBI. Others are allowed to issue other

system cards other than Open System

License and Supervision

Entities issuing closed-system pre-paid card are exempted, subject to reporting requirements to RBI;

All other entities would require RBI authorization

India: Regulatory FrameworkRegulatory Framework addressing Pre-paid risk in India

Capital Requirements

paid Instruments

Only Banks/NBFCs meeting regulatory Capital Adequacy Ratio are allowed to issue all types of Pre-

paid Instruments

KYC/AML/CFT KYC/AML/CFT rules applicable based on the features of

instruments and vulnerability of misuse

Deployment of Money collected

Collected money should be held with the issuing entities. Non-bank issuers (except those exempted) required to maintain outstanding

balance in escrow account with a scheduled bank.

Reloading of Cards

Both banks and NBFCs may issue reloadable instruments.Reloading Closed System Cards allowed at retail agents. Bank

issued SVCs can be reloaded at ATM & through Internet banking.

Money TransferPre-paid payment instruments can be used for transfer

of funds online or using mobile phone networks.

KYC/AML/CFT KYC/AML/CFT rules applicable based on the features of

instruments and vulnerability of misuse

Security and Fraud Prevention

Adequate information and data security systems, and prevention and detection of frauds should be at place

Complaints and Redressal

Effective mechanism for redressal of customer complaints shall be in place

Main Legislation Payment and Settlement System Act, 2005

RegulationMoney, Payment, Clearing and Settlement Providers

Regulation No. 1 of 2007

Regulation empowers Central Bank of Sri Lanka (CBSL) to supervise, regulate and monitor service providers including entities offering

money service or payment system

Direction on Service Providers of Card Based Payment Instruments – made under Regulation No. 1 of 2007

Regulatory Framework addressing Pre-paid risk in Sri Lanka

Card Based Payment

Instrument

A payment instrument or “Payment card” includes -Credit Card, Charge card, ATM card, Debit Card, Stored Value

Card

A physical or virtual Card-Based Payment Instrument acquired by Cardholder by paying advance amount, and value of funds is

installed in card as stored value, presented in rupee or converted into other units

Prepaid Card

A physical or virtual Prepaid card issued to execute payment of an obligation/s incurred in single type of

economic transaction

Single/Multi-purpose Stored

Value Card

A non-bank institution registered by CBSL for Stored Value Card business of single-purpose multi-

merchant, multi-purpose multi-merchant and non-merchant

Specialized Stored Value

Card

RegistrationNon-bank entities are required to register at CBSL as

Specialized Stored Value Card Institution to issue Stored Value Card

CurrencyStored Value Card used for transactions in Sri Lanka are

required to calculate units in rupees

Prior Notification

Notification to CBSL required for giving advertisement or for cards promotion

Customer Information

Financial Transactions Reporting Act / Anti Money laundering Act requires reporting of suspicious cash transactions to CBSL and places KYC obligations

on banks and financial institution

Applicable LawsBangladesh Payment and Settlement Systems Regulation,

2009;Money Laundering Act, 2002; and

Foreign Exchange Regulation Act, 1947

Regulating and supervising of payment systems is operative in Bangladesh, including cross border transactions

Recognizes Payment Service Providers (PSP) as new quasi financial entities and recognizes issuance of E-money, electronic

fund transfer (EFT), Pre-paid Card

For license PSPs may be required to maintain capital adequacy at levels specified by the Bangladesh Bank [Reg.4(vii)]

Banks/Financial Institutions maintaining accounts with Bangladesh Bank for meeting Cash Reserve Requirement are exempted from

obtaining license as PSP.

Regulatory Scope

Regulatory Framework addressing Pre-paid risk in Bangladesh

Proportionate and risk based regulations

Low risk prepaid products with no cash redemptions may be exempted from license

Conditions for authorization should be pre-specified

Fees should be designed keeping in mind the poor, unbanked and underserved community

With regard to risk management, security and integrity - General Guidelines should be in place to be followed by all to ensure best practice

Semi-closed/open products may be exempted, subject to following a regular code of conduct

Regulatory Approach: One Size Does Not Fit All

AML

Exchange of Information

between FIUs

Information Exchange in a Rapid manner

Proper International Co-operation Framework

Build a Comprehensive

and Efficient Domestic Capacity

Ratification and Implementation of International Conventions