Guidance on electronic money

55. The following factors will increase the risk of electronic money products being used for money laundering or terrorist financing:
a. high, or no, Transaction or purse limits: the higher the value and frequency of Transactions, and the higher the purse limit, the greater the risk, particularly where Customers are permitted to hold multiple purses;
b. frequent cross-border Transactions, unless within a single scheme, can give rise to difficulties with information sharing: dependence on counterparty systems increases the risk;
c. funding of purses by unverified parties presents a higher risk of money laundering, whether it is the Customer who is unverified or a third party;
d. funding of purses using cash offers little or no audit trail of the source of the funds and hence presents a higher risk of money laundering;
e. funding of purses using electronic money products that have not been verified may present a higher risk of money laundering;
f. the non-face-to-face nature of many products gives rise to increased risk;
g. the ability of consumers to hold multiple purses (for example, open multiple accounts or purchase a number of cards) without verification of identity increases the risk;
h. cash access, for example by way of ATMs, as well as an allowance for the payment of refunds in cash for purchases made using electronic money, will increase the risk;
i. increased product functionality may, in some instances, give rise to a higher risk of money laundering (product functionality includes Person-to-business, Person-to-Person, and business-to-business transfers);
j. products that feature multiple cards linked to the same account increase the utility provided to the user, but may also increase the risk of money laundering, particularly where the Customer is able to pass on linked 'partner' cards to anonymous third parties;
k. segmentation of the business value chain, including use of multiple agents and outsourcing, in particular to overseas locations, may give rise to a higher risk; and
l. the technology adopted by the product may give rise to specific risks that should be assessed.
56. Electronic money issuers should address the risks that are inherent in payments in a similar manner to other retail products: by putting in place systems and controls that prevent money laundering and terrorist financing by detecting unusual Transactions and predetermined patterns of activity.
57. The systems and controls electronic money issuers put in place must be commensurate with the money laundering and terrorist financing risk to which they are exposed. The detail of electronic money issuers' systems and controls will therefore vary. Examples include those that:
a. place limits on purse storage values, cumulative turnover or amounts transacted;
b. can detect money laundering Transaction patterns;
c. will detect anomalies to normal Transaction patterns;
d. can identify multiple purses held by a single individual or group of individuals, such as the holding of multiple accounts or the 'stockpiling' of pre-paid cards;
e. can look for indicators of accounts being opened with different electronic money issuers as well as attempts to pool funds from different sources;
f. can identify discrepancies between submitted and detected information, for example between country of origin submitted information and the electronically-detected IP address;
g. deploy sufficient resources to address money laundering risks, including, where necessary, specialist expertise for the detection of suspicious activity;
h. allow collaboration with merchants that accept electronic money to identify and prevent suspicious activity; and
i. restrict funding of electronic money products to funds drawn on accounts held in the ADGM.