How to Protect Against Fraud and Money Laundering When Delivering Payments to the Masses
Mass payment, like the name implies, is a way of sending payments to many recipients at once. This method of payment is popular with organizations that deal with international direct sales commissions, survey incentives, customer rebates, or employee benefits. We spoke with Rob Hartley, Trulioo’s Director of Product, to find out more about the mass payments space and how electronic identity verification can help deliver mass payments to the masses.
KJ: What are the benefits of mass payments?
RH: Mass payments are convenient, cost-effective, and good for business. They allow businesses to send payments quickly to many recipients at the same time, even if they live in different countries using different currencies. It costs businesses less time, money, and effort to use mass payments than to process payment for each recipient individually, and it keeps employees and customers happy.
KJ: How can you send mass payments?
RH: For international payouts, there are many online options, like Payoneer, PayPal, and hyperWALLET. For payouts within the US, there are automated clearing houses [ACHs] and Dwolla, and there’s also the European equivalent, SEPA.
Setting up online mass payments is pretty straightforward. It can be as easy as uploading a text file or spreadsheet with the recipients’ email addresses, payment amounts and currencies.
KJ: What do you see as the biggest concern for mass payment businesses?
RH: Anti-money laundering compliance is definitely high on the list. Mass payment companies don’t have access to the same resources as the big banks and other financial institutions when it comes to due diligence. However, they’re still held to the same standard as major banks for anti-money laundering [AML] and know your client [KYC]. There can be a lot of manual effort required to carry out all of the necessary checks. That can really slow down the onboarding process, some sources of information could be missed.
KJ: What group poses the greatest threat to these companies?
RH: By far, I believe that criminal and terrorist organizations pose the biggest threat to mass payment companies. These businesses need to be able to quickly root out those organizations that are trying to take advantage of the relatively weaker controls against money laundering.
Let’s take pre-paid cards, for example. When I travelled on business for another company that I worked for in the past, my credit card information was stolen. It probably happened when someone used a card skimmer attached to a legitimate payment terminal. Once I returned home from my trip, my credit card company started calling me to ask if I had been buying large quantities of pre-paid cell phone air time cards. When I say large quantities, I mean buying cards totalling in the thousands of dollars. Clearly, I did no such thing. In this situation, a criminal or terrorist organization could easily use the proceeds from selling these cards to finance their operations.
KJ: How can mass payment businesses protect against fraud, money laundering and other criminal activities?
RH: There’s no question that there needs to be a way for mass payment companies to quickly verify the identities of their customers and ensure that the companies’ services won’t be misused. Trulioo has a very cost-effective and efficient electronic identity verification solution that mass payment companies can use to keep criminals and terrorists from opening accounts. GlobalGateway can verify whether or not applicants are on any one of 26 watchlists, which are created by governments to keep track of possible security threats.
KJ: Beyond dealing with the threat of money laundering, how can electronic identity verification help deliver mass payments to the masses?
RH: Electronic identity verification can simplify and speed up the entire mass payment process, from start to finish. As I mentioned, there can be a lot of manual effort involved in bringing new customers onboard. Using electronic identity verification can streamline application process and make complying with regulatory requirements less of a burden.
KJ: What potential do you see for digital currencies like Bitcoin in the mass payment space?
RH: Digital currencies have come a long way since they were first introduced over a decade ago. With bitcoin, there is still a lot of talk about how transactions can’t be traced and the concerns of it being used for illegal activities, like Silk Road. However, researchers recently discovered that bitcoin transactions may not be anonymous as we thought. Also, more countries are looking at ways of regulating the use of bitcoin. Canada has already passed a law that regulates how bitcoin is used in this country, and Canadian bitcoin businesses are subject to the same AML and KYC requirements as mass payment companies, foreign exchanges, and related businesses.