AML securing PSP transactions 

AML Securing PSP transactions.

Payment Service Providers (PSPs) are becoming crucial in the value chain of cross-border transactions. Their innovative business approach, global coverage, and competitive cost levels make them an appealing business party business, thus upending the way established industry payment providers do business. They are, however, increasingly scrutinized. Being non-compliant with appropriate anti-money laundering and counter-financing of terrorism (AML/CFT), legislation can result in penalties and other punitive measures. Managing financial crime risk while keeping up with the rate at which new payment methods emerge, like in any fast-paced environment, presents a significant challenge, not to mention that, detecting and combating unlawful financial activity in well-established currencies and payment methods is quite complicated. Besides, we have a real dilemma when balancing the optimal breadth of rules (such as the level of due diligence) with the amount of money being channeled through the growing number of platforms.

Why it is important for a Payment Service Provider (PSP) to comply with AML/CTF regulations?

AML regulations are on the must-have list of every PSP, due to their business nature, as they conduct a high volume of small-amount transactions, and accept payments on merchants’ behalf, which can be grounds for money laundering activities or criminally derived funds.

What are PSP AML/CTF obligations?

The law requires PSPs to implement robust AML/CTF programs within their internal procedures. These frameworks' key components are as follows:

  1. Identification of your client: This is the main step in the identification process, such as validating an ID card or legal documentation of a business client. However, and depending on the amount involved (cumulated transactions, assets on the account, destination, or origin of transactions), a full KYC (Know Your Customer) document detailing the client's activity will be required to examine the geographical risk, behavioral risk, and any other risk associated with the credit cards used, and so on.
  2. The Risk-Based Approach: Introduced in the 1990s, its purpose is to motivate financial professionals to adopt customer monitoring depending on the risk they represent. The goal is not to monitor every client in the same way, but to focus on clients who pose a serious threat based on their risk profile (KYC).
  3. Screening and monitoring: Start by screening shareholders, partners, and institutions against sanctions and black- and PEP lists, followed by continuous monitoring of all merchants’ transactions, to make sure that they  are meeting their  activity profile. In the case where merchant behavior raises  suspicious alerts, then “Enhanced Due Diligence” should be conducted. However,if still in doubt, an STR (Suspicious Transaction Report) must  be filled and then submitted to the regulator.
  4. Staff Training: PSPs should create a control compliance culture among their employees, as it is the best tool to combat money laundering starting from within. That’s why there is an ongoing effort to promote staff training, development, and awareness programs across the various aspects of criminal proceeds laundering and terrorist financing.

At MontyPay, we believe that the future of payments is already here. As a Fintech institution, we are driving the 'creative destruction' of the traditional payment model and creating a fully digitalized and secured payment system.