Money Laundering Risks Associated With Payment Service Providers (PSP)

The nature and level of risk a PSP will be exposed to in relation to money laundering will be directly correlated to the nature of the market and businesses which it services. There are, however, a number of key generic risk factors that PSPs must consider when assessing its money laundering risks. The money laundering risks associated with PSPs will be more prevalent if there are no geographical restrictions or limitations on the markets which the platform services. If the PSP facilitates payments and transactions in jurisdictions which are considered as high risk from a money laundering perspective, or in countries with lax or ineffective AML regulations and supervision, then the PSP is at far greater risk of facilitating money laundering which may result in severe regulatory and financial penalties.

PSPs which have limited ability to restrict or control the activities of their customers and merchants, as well as allowing high-frequency usage, will also increase the risk of the PSP being used to facilitate illicit activity. It will be difficult to identify suspicious activity as criminals may conceal low volumes of illegal payments behind high volumes of legitimate activity. If a PSP does not have restrictions on the nature or location of transactions and does not have limits relating to frequency of payment or reloadability (if applicable), then it will be at a greater risk of facilitating money laundering and other financial crime. Other factors which will expose the PSP to higher risks of money laundering will include a lack of effective auditing, the ability for customers to transfer funds domestically and internationally, an inability to aggregate and identify multiple transactions or an ineffective monitoring programme. PSPs which facilitate high volume and intensive payments, such as those associated with the iGaming industry, will also be at higher risk of facilitating money laundering. These risks can be managed or reduced by a PSP if they have effective features and controls.

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