Key Takeaways: e-Money Services in AML
According to the Electronic Money Directive 2 (EMD2), e-money means monetary value stored magnetically and used for payments by entities that are not issuers. e-money is an alternative to cash kept in electronic form or just the representation of cash. However, it differs from traditional bank deposits, which involve real money held in bank accounts.
E-money services include issuing and distribution, money transfers, currency exchange services, direct debit and credit transfers, payment account cash deposits and withdrawals, and granting account information. On the contrary, e-money institutions do not facilitate bank accounts, deposits, and international transactions.
The following are key risk factors that expose EMIs to ML/FT risks, respectively, to their e-money services:
Regulatory authorities require e-Money service providers to perform due diligence for their customers. E-Money Institutions must perform KYC/KYB checks to verify customer identities and know beneficial owners. Further, e-money institutions must perform transaction monitoring to detect unusual patterns and flag suspicious transactions.
Regulatory authorities confine the use of anonymous instruments while mandating screening for sanctions, PEP and adverse media individuals. Moreover, EMIs must report suspicious activity and ensure recordkeeping of each customer’s details and transaction history.
RapidAML software helps e-money service providers fulfil regulatory obligations effortlessly. The software automates customer onboarding by performing KYC/CDD digitally. Further, it helps EMIs to screen customers against global sanctions and PEP lists to identify sanctioned individuals and high-risk customers who require enhanced due diligence.
Moreover, RapidAML helps in assessing risk for customers and provides risk scoring. The software also allows transaction monitoring to identify money laundering patterns among onboarded customers. With this, it regularly monitors customers for changes in behaviour or documents to ensure effective ongoing due diligence.
RapidAML anti-money laundering software helps identify suspicious activity and facilitate regulatory reporting (SAR/STR) through integration with the goAML platform. In conclusion, the software helps e-Money providers meet regulatory compliance requirements.
Bank accounts offer interest, and customers can withdraw cash or use cheques for payments; on the other hand, e-money institutions don’t facilitate interest and access physical cash or cheques.
No, e-money providers are not regulated like banks, as they have separate licenses and frameworks. Further, these institutions focus mostly on payment services and restrict banking services such as lending or investing.
e-Money Institutions must leverage risk-based due diligence, which involves effective KYC/KYB, screening, transaction monitoring, SAR/STR reporting, and recordkeeping as AML controls.
Prepaid cards store money electronically and allow users to pay bills without any direct link to bank accounts. These cards are commonly used by criminals because of their global reach, anonymity, obscured fund origins, service complexity, and portability.
To comply with AML/CFT obligations, e-money service providers must keep records for customer due diligence, AML/CFT policies and procedures, and transactions.
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