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Key factors the payments industry must tackle to beat terrorist financing

A blog posted on the European Payments Council (EPC) website discusses the considerations for a future legislative proposal on e-payments, remittances, prepaid cards and virtual currencies.

Olivier Salles and Pierre-Yves Esclapez, at the European Commission's Directorate General for Financial Stability, Financial Services and Capital Markets Union, make the following observations and objectives on how the EC and EPC need to tackle non-banking payment methods that could potentially be used by criminals and terrorists:

  • Anonymity must be tackled. Criminals of all kinds want to hide their names, addresses and account details. The European payments industry must take steps to prevent anonymity where necessary for electronic payments, cash, prepaid cards and virtual currencies.
  • Virtual currencies are not currently regulated at EU level, so new legislation to address anonymity is a “conceptually easier task”. However, it poses a challenge for regulators, due to the global and scattered nature of market players. Plus, virtual currencies are anonymous by design, with wallet addresses replacing bank account details, meaning that regulation is likely to be ineffective.
  • Exchange platforms are a bridge between the real and virtual economies. Ensuring that these platforms are part of the AML framework and act as gatekeepers is already a step forward in combatting full anonymity. However, the fact remains that many virtual payments are not routed through exchanges but there is a growing network of merchants and consumers who accept virtual currencies.
  • Prepaid instruments are already covered by the third and (soon to be implemented) fourth Anti-Money Laundering (AML) directives, as well as the second e-money directive. However, the threshold for identifying customers of prepaid cards, currently €250, needs to be addressed. Can prepaid cards continue to be used and remain profitable for the industry with less or no anonymity? While prepaid cards were used for hotel booking and car hire by the Paris terrorist attackers, they are used far more for legitimate and necessary purposes, such as paying social benefits to citizens, helping unbanked Europeans access financial services or allowing seasonal workers to be paid in countries where they don't have a bank account.
  • Other measures being considered include: creation of central registers of bank and payment accounts, strengthening cooperation between Financial Intelligence Units and set absolute limits on cash payments.

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This item appears in the following sections:
Fraud Prevention
Anti-Money Laundering
Minimizing Fraud Procedures
Minimizing Payment Fraud

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