Sustaining the Growth of Mobile Money Services in Developing Nations: Lessons from Overregulation in

Author: Amanda Bloch Kernan

PDFSustaining the Growth of Mobile Money Services in Developing Nations: Lessons from Overregulation in the United States

Abstract




Billions of people around the world are excluded from the formal financial system and forced to store, transfer, and borrow money by using inefficient and unsafe methods. The recent introduction of mobile money programs in developing countries is revolutionizing financial inclusion by allowing users to store and transfer money on their mobile phones, thereby eliminating the need to access a bank or an internet connection. Unfortunately, fears that these programs will be used to launder money and finance terrorism have led the international community to develop and implement restrictive anti-money laundering policies that will likely impede the growth and accessibility of these programs. This Article posits that these policies will ultimately cause financial institutions to terminate relationships with mobile money providers, resulting in less secure mobile money transactions and more transactions taking place through the informal economy. This conclusion is based on the history of money-service businesses in the United States, which lost access to financial services due to severe penalties, overzealous regulators, and stringent anti-money laundering regulations that were applied in unpredictable ways.

This Article encourages the international community to look to gatekeeper theory to create an anti-money laundering regime that incentivizes financial institutions to remain in the mobile money industry. By applying gatekeeper theory and creating an optimal liability regime, the international community will be able to incentivize financial institutions to remain in the industry while compelling them to dedicate the proper amount of resources toward identifying and preventing money laundering and terrorist financing.

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