Page 37 - The Digital Financial Services (DFS) Ecosystem

ITU-T Focus Group Digital Financial Services
Ecosystem

• Requiring Anti-Money Laundering (AML) /Combating the Financing of Terrorism (CFT) monitoring of
suspicious activity
– Financial Inclusion Perspective: overly tight AML/CFT monitoring can either discourage usage or make
the cost of operating a system high; leading to prices unsupportable for poor populations. Regulators
should aim to achieve risk-proportionate AML/CFT monitoring.

• Requiring AML/CFT reporting of suspicious activity
– Financial Inclusion Perspective: reporting of suspicious activity should be required even for lower-risk
accounts.
• The appropriate identification and registration of end users by agents
– Financial Inclusion Perspective: agents should be properly trained and monitored to ensure they
follow all required customer due diligence procedures upon account opening (and as required for
cash-in, cash-out, bill payment, etc.)

2.6 Category 6: Other

• Telecommunications regulations setting minimum quality of service requirements
– Financial Inclusion Perspective: end users must feel that digital financial services are as reliable and
available as cash. High quality of service is likely to help meet that standard. A minimum standard
may encourage that perception.

• Regulations relevant to labor laws around agent banking
– Financial Inclusion Perspective: agents play a critical role in supplying digital financial services,
particularly to those who may have previously been unbanked. However, their services may not be
commercially viable if the cost to serve becomes too high. Regulators should be aware of this balance
and how it may intersect with labor laws.
• Tax policies on merchant sales using digital financial services
– Financial Inclusion Perspective: merchants may be dissuaded to use digital financial services if
suddenly they are taxed on gains that, when using cash, went unnoticed and untaxed. Regulators
should be cautious of how to implement and message tax policies to merchants who serve lower
income end users. Consideration should be given to creating new tax policies that actively encourage
merchant participation in the DFS ecosystem.

3 Managing the Regulatory Environment

Given the complexity of the DFS regulatory environment, it remains imperative that the two sector authorities
involved in these efforts – financial services and telecommunications – collaborate to address these issues.
Below, the Ecosystem Working Group outlines a survey of how regulators currently work together, provide
a draft memorandum of understanding template for Authorities in a given country to formally outline joint
goals and methods of working together, and outline considerations if regulators are interested in formalizing
cross-border collaborations.

3.1 Survey of Regulators

Below we have outlined the results of a recent study conducted by ITU with telecommunications regulators on
collaborative efforts. As you will see, various approaches exist to working together, but many have recognized
and actualized this need.

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