Virtual wallets new modes for illegal drug payments

While mobile technology has steered advancements in the payments industry making it easier to make purchases without ever opening wallets, it has also made it simple for illegal activities such as drug money transfers, officials say.

Virtual wallets and easy cash which are mobile apps that have been introduced by telcos and banks are being used to pay drug dealers, Central Bank (CB) officials told the Business Times.

Essentially these apps were used as a financial inclusion strategy, mainly targeted at the small and medium sector that isn't ready with facilities to operate credit card transac- tions. These apps allow people to transfer value using their mobile phones while increasing convenience and enhancing payment security, a CB official said. He added that mobile payment systems are one of the many technology shifts and that the persistent use of smartphones and other mobile technologies have put the regulator on alert over drug-related transactions. These enable an owner to have a cash account in their mobile phone which they can top-up and carry out a array of cash transactions directly from their mobile phones.

All transactions and validations take place electronically and the users now have a paperless method of transaction processing, the CB official added.

"Drug merchants across the country use these apps to accept payments," he said. Some of the recent measures initiated by the CB include formulating of reporting procedures and directions which have been issued to licensed banks and telcos requiring them to comply with detailed "Know-Your-Customer" rules.

Accordingly, all institutions are expected to have detailed information on customers and the nature and sources of their financial transactions.

The CB official said that the CB has a system in place to combat this to an extent by getting the telcos and financial institutions to send suspicious transaction reports (STR) to the CB.