Money Transfer in Cyberspace
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Transcript of Money Transfer in Cyberspace
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Money Transfer in Cyberspace
MTRA 16th Annual ConferenceNovember 13 – 15, 2006
Presented by Joseph Cachey IIISVP, Global AML ComplianceThe Western Union Company
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Money Transfer in Cyberspace
What is Cyberspace?
a) A term coined by William Gibson in Neuromancer (1984)
b) A metaphor for the Internet
c) The opposite of Meatspace
d) A virtual reality which represents the Noosphere / Popperian Cosmology both “inside” computers and “on” computer networks
e) All of the Above
Source: Wikipedia (from cyberspace) 2006
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Money Transfer in Cyberspace
In terms of Money Transfer, “Cyberspace” is:
Use of the internet for purposes of facilitating movement of funds or conducting a money transfer. These include:• Consumer to Consumer transfers (C2C)
• Consumer to Business transfers (C2B)
• Business to Consumer transfers (B2C)
• Business to Business transfers (B2B)
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Money Transfer in Cyberspace
Typical Transaction Flow
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Money Transfer in Cyberspace
Typical Cyberspace Money Transfer Methods
Money Transmitter (MSB) Websites
– Credit / Debit / Prepaid Card to MSB Payout
– Bank ACH to MSB Payout / MSB Funding to Bank ACH
– Bill Payments
– Staged Transactions
– Prepaid Card top-ups and Virtual Account Funding
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Money Transfer in Cyberspace
Source of Funds for Internet Money Transfer
Common
• Banking Accounts
• Credit Cards
• Debit Cards
• Prepaid Cards
Emerging
• Virtual Accounts / Virtual Prepaid
• Staged Online then funded by Cash
• Digital Currencies / Electronic Cash
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Money Transfer in Cyberspace
Benefits of Cyberspace Money Transfer
Consumer Benefits – Convenience– Speed– Costs– Privacy– Ease– Security
Money Transmitter Benefits – Low Costs of entry– Low Overhead– Speed– Widespread Access– Consistency– Revenue
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Money Transfer in Cyberspace
Risks with Cyberspace Money Transfers
– Receiver Fraud– Rogue Websites– Account Takeovers
(Identity Theft)– Undisclosed Fees– Limited Consumer
Protection (Emerging Sources)
– Possible Limited Recourse
– Security & Phishing
– Customer Identification and Verification
– Transaction Authorization and Merchant Liability
– Sender and or Receiver Fraud– Account Takeovers (Identity Theft)– Money Launderers– Terrorist Organizations– Website Compromises– Disasters
Consumer Risks Money Transmitter Risks
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Money Transfer in Cyberspace
Steps to controlling your program’s risk
• Sever links between your products and unapproved transfer methods
• Police the internet and protect your brand
• Impose limits and velocity checks on amounts that can be transferred
• Enhance your customer authentication – remember international!
• Enhance your transaction authorization process
• Develop a robust monitoring and early warning program
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Money Transfer in Cyberspace
Risks from Regulator’s Perspective
– Rapid Proliferation with low barriers to entry
– Lack of Regulation (Emerging Sources)
– Unregistered Companies
– Money Laundering and Terrorist Financing
– Borderless
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Money Transfer in Cyberspace
Risks from Regulator’s Perspective (cont.)
– Offshore Website Hosting
– Stopping illegitimate websites
– Stopping links between legitimate and illegitimate transfer methods
– Consumer Protection
– Who Regulates?
– What / who do you regulate?
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Money Transfer in Cyberspace
Current Regulatory Environment
– PCI Compliance Rules (Dual Factor Authentication)
– Regulation E (Transaction receipts and account statements)
– MSB Registration Required?
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New Product Examples
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Money Transfer in Cyberspace
Prepaid Cards – A card or device withstored value that is used for payment in the form of electronic cash. Often referred to as Stored Value Cards.
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Money Transfer in Cyberspace
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Money Transfer in Cyberspace
Virtual Accounts / Virtual Prepaid: A prepaid card or account number with stored value that exists in cyberspace only. Mainly used for online transactions or card to card money transfers.
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Money Transfer in Cyberspace
Staged Online then funded by Cash: Prearranging a purchase online or possibly a money transfer then funding via a cash remittance at a money transmitter.
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Money Transfer in Cyberspace
Electronic Cash – is a digital form of money. Can be stored electronically or held virtually. Can be denominated in an official currency or a derived artificial currency.
New section in the 2006 FFIEC BSA/AML Examination Manual.Pages 202 – 204
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Money Transfer in Cyberspace
Current Regulatory Environment (cont.)
– State Laws – are virtual accounts monetary instruments?
– International Regulations
– Reporting Requirements
– AML Programs for Offshore sites?
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Money Transfer in Cyberspace
A world of Electronic Cash awaits you…
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Money Transfer in Cyberspace
How digital currency works
Source: FATF / GAFI Report on New Payment Methods, 13 October 2006
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Money Transfer in Cyberspace
Popular Examples
e-gold
e-bullion
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Money Transfer in Cyberspace
Typical Cyberspace Money Transfer Methods
Bank Websites– Bill Payments
– ACH Payments
– Account to Account
– Account to MSB Payouts
– Prepaid Card Purchases
– Other
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Money Transfer in Cyberspace
Sample Bank Money Transfer Website
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Money Transfer in Cyberspace
Sample MSB Money Transfer Website
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Money Transfer in Cyberspace
Non-Typical Cyberspace Money Transfer Methods
– Anonymous Accounts and ProductsAccounts or products which do not require customer ID or provideanonymous ways to transfer money.
– Digital Currency transfer services Allows movement of funds between alternative forms of electronic cash
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Money Transfer in Cyberspace
Sample of a Fully Anonymous Prepaid Card
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Money Transfer in Cyberspace
Cards Tied to Numbered Accounts with No ID Required
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Money Transfer in Cyberspace
What loading methods are appropriate?
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Money Transfer in Cyberspace
Phishing – “the bait”
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Money Transfer in Cyberspace
Phishing – ”the hook”
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Money Transfer in Cyberspace
The End
Cyberspace Contact: [email protected]
Meatspace Contact: 720-332-4642