Today the digital revolution is reshuffling the cards of the traditional economic model. Dematerialized transactions are becoming the new normal. This is evidenced for remittances in sub-Saharan Africa where they reached $46 billion in 2018, up by 10% in a year –, according to World Bank figures published last April. What is striking is that this amount is much higher than FDI ($32 billion in 2018), as highlighted in the latest UNCTAD world investment report.
In Ghana alone, $3.5 billion were transferred in 2018, which represents 7.3% of the country’s GDP. Obviously, remittances from the diaspora are a catalyst for the development of recipient countries, especially when an enabling ICT environment accelerates transfers and reduces their costs, which often remain high.
In this dynamic, mobile network operators play an increasingly important role, with their mobile money services representing a less expensive means of transferring smaller amounts.
In 2019, as much as 63% of all dematerialized transactions were expected to take place via mobile phone transfers, which is not surprising given the extensive penetration of mobile money services on the continent, with some 350 million users so far.
In Ghana today, the value of mobile money transaction flows equates to 75% of GDP, driven by strong regulatory measures and increased collaboration between MNOs and the traditional financial system.
While this trend of increased transaction dematerialization promotes financial inclusion and therefore improved social development of Africa’s unbanked populations, risk management practices call for an adaptation of the methods used to regulate and monitor the financial transactions ecosystem.
For banking and financial authorities, the stakes are high. Digitizing these methods through the use of advanced ICTs means being able to obtain real-time statistics on transactions, perform in-depth analyses and ensure operations compliance and security.
International regulations have increased the compliance burden for banks and financial institutions. Indeed, in a rapidly changing world, the risks to which banks are exposed are manifold, and compliance technologies facilitate improved risk mitigation. It is therefore incumbent upon the regulatory bodies, starting with central banks, to play a major role in the implementation of appropriate rules, processes and technologies to ensure compliance with the KYC and AML laws – respectively related to the verification of customers’ identities and the fight against money laundering. This is the only way to secure the market and to make it compliant and free from fraud.
In response to these growing needs for traceability and real-time analysis of dematerialized transactions, Global Voice Group launched their X-Stream remittance transaction monitoring solution last fall. This platform, which complements GVG’s mobile money monitoring platform Visio Fin-X (verifying 25% of all mobile money transaction flows in sub-Saharan Africa), provides an accurate and complete view of mobile money and remittance market development and trends in a country and makes it possible, through the collection and continuous analysis of key information, to apply the compliance standards in force, while ensuring users’ data confidentiality.
Detecting suspicious transactions
GVG’s X-Stream platform identifies the list of origin countries for all remittances, as well as the associated transaction volumes and values for single transactions as well as global amounts. In so doing, X-Stream performs an automated and detailed analysis of financial transactions, quantifying the total amount and total value of transactions related to each service provider, with associated financial intelligence centre client identification data.
In verifying remittance data, X-Stream delivers dual benefits: it improves fiscal compliance on these transactions by preventing under-reporting by transfer agents and reinforces financial security processes by automatically detecting suspicious transactions potentially linked to money laundering and other criminal activities through the cross-referencing of all transacting individuals to the world’s key criminal and financial databases.
It is clear that, while MNOs play an increasingly important role in money transfers, effective supervision of dematerialized transactions requires an approach where compliance legislation and policies are integrated with cutting edge ICTs in order to oversee all financial transactions within a territory, thus helping to reach inclusive growth goals.