M-commerce raises AML issues

The Asian Age
Asain Age Correspondent , May 11, 2006

While a new study by juniper Research predicts that the bullish economies of India and China will fuel a five-fold increase in annual mobile retail (m-retail) transactions for the rest of Asia-Pacific by 2008, banking experts are concerned about anti-money laundering or AML issues associated with m-commerce.

“If m-commerce takes off in India, the chief concern will be the ability of banks to deal with AML issues in mobile transactions. AML solutions are currently deployed at the back end operations in the banking and financial sectors and it becomes difficult to detect suspicious behaviour at the front end,” said Mr. Ravi Duvvuru, group head (compliance) Kotak Mahindra Bank, while addressing delegates at Banknet India’s second annual CTO summit in Mumbai on Wednesday.

Airtel’s business head Manoj Paul expects the m-commerce industry to grow exponentially in the next two years as people get familiar with the concept of mobile-o-mobile payments, which allows users to pay for their purchases through mobile phones.

It also removes the need for the installation of costly point-of-sale terminals for retailers transacting through credit cards. “This new method of payment eliminates credit car fraud. Currently, there aren’t enough shopkeepers using this technology in the market,” added Mr. Paul.

AML software experts suggest that a good AML solution would help gather evidence of money laundering.

“The ALM solution for banks needs to shift focus into dynamic risk profiling and move into risk assessment matrix. The current know-your-client norms are static and specify only basic data such as residential address, locality and educational background, among others. The risk profile of each customer needs to change based on current account activities. This includes suspicious financial transactions or sudden fund transfers in accounts that would not otherwise see such activities”, said Mr. Hanuman Tripathi, managing director, Infrasoft Tech, an AML software vendor.

Experts suggested that the advent of m-commerce would result in the growth of the Rs 200 crores AML software market, with vendors targeting banks, asset management companies and securities agencies. “M-commerce is a safe method of completing transactions since KYC data has been already created and stored,” he said.

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