Staff Reporter :
Disbursement of social safety net allowance through Mobile Financial Service (MFS) providers may face jolt due to faulty accounts opened by the operators without KYC compliance, industry experts warn.
The concern has been raised as some MFS operators have opened millions of accounts as per the lists of mobile SIM owners without following the KYC protocol as per the Regulations of Bangladesh bank and AML&CFT Guidelines of BFIU. Such account opening opportunity allows many people to open multiple MFS accounts of some operators and make frauds and financial crimes untraced.
Besides, MFS accounts opened based on mobile user’s registration ignoring KYC compliance enforced by Bangladesh Bank and BFIU, fraudsters would be able to do social engineering to grab money from genuine recipients.
A Finance Ministry study, which founded big anomalies in the recent government’s aid disbursement to poor people through MFS channels during the Covid-19 pandemic also feels the concern. Nearly 28 lakh people who were owners of saving certificates and government employee and retired officials enjoying government pension funds were listed as ultra-poor who were to receive the government’s aid fund, according to ministry findings. Strict KYC compliance can only stop repetition of such precarious situation.
Any banking account without proper validation of customers through face to face interactions is risky and the big challenge for mobile banking. Therefore, regulators across the globe have imposed on MFS providers to identify and validate their customers’ properly through face to face interactions and follow KYC/e-KYC rules to avoid any deviations.
“KYC means – Know Your Customer. It is a process by which banks/MFS providers obtain information about the identity and address of the customers. This process helps to ensure that bank/ MFS services are not misused.”
“Once MFS accounts are opened ignoring KYC rules, people can take advantage of including their near and dear ones in the list of poor people”, a top executive of a leading commercial bank said.
To avoid fraud and duplication in aid disbursement, he said the recipients list must be prepared on the basis of accounts registered based on e-KYC/paper KYC. Once the list is prepared based on registered MFS account numbers having KYC and NID verification, no discrepancy can take place.
“No one can receive duplicate disbursement, as one individual can open only one account with one MFS provider”, he mentioned.
Another senior banker said transactions through MFS channels is completely a banking process. So, account opening process should be face to face, properly validated and e-KYC/paper KYC should be followed.
“Account opened by MFS operators based on the lists provided by MNOs should not be considered as valid accounts to avoid any mass disturbance in the financial markets”, he said.
The government is going to distribute BDT 29.4 billion allowance under social safety network through Nagad, the digital financial service provider of Bangladesh Post Office and bKash, the leading MFS operator in the country with over 50 million account holders across the country.
Of the total allowance, 75 per cent money would be disbursed through Nagad, which has a practice of openning millions of accounts based on the SIM of MNOs ignoring proper KYC compliance.
“Opening such accounts without validation of persons (face to face interaction) and avoiding KYC compliance is highly risky and allows fraudsters to grab others money and launder fund for the purpose of terror financing”, a central bank official said.
“Even through bank account, there is room for manipulating the list of recipients. Besides, disbursement through bank account may defeat the purpose as similar efforts in the past had always failed for the obvious inconvenience attached to such initiatives”, Bangladesh Bank (BB) official said on condition of anonymity.
The government distributes tens of billions of takas among the poor and the destitute under the social safety programmes every year. Under the government to person (G-to-P) method, the government has already disbursed the funds among 1.237 million beneficiaries in 77 Upazilas under 21 districts through agent banking.
