how we can protect customers’ funds in mobile money systems jonathan greenacre (oxford university)...

How We Can Protect Customers’ Funds in Mobile Money Systems

Jonathan Greenacre (Oxford University)

Professor Ross Buckley (UNSW)

Dr David Ramos Muñoz (Universidad Carlos III de Madrid)

Javier Solana (Oxford University)

World Summit on Information SocietyGeneva, 29 April 2015

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Outline of Presentation1. The issue: risks to customers’ funds and mechanisms to reduce them

2. Common law countries: we can use trusts to provide these mechanisms (theory and practice)

3. Civil law countries: we need to use other legal instruments to provide these mechanisms (theory)

4: Additional resources

5. Discussion of regulators’ challenges when protecting customers’ funds

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1. Risks to customers’ funds and mechanisms to reduce them

Customer

4

1. Risks to customers’ funds and mechanisms to reduce them

ProviderCustomer

E-Money

Regular money

5

1. Risks to customers’ funds and mechanisms to reduce them

ProviderCustomer

Risk and Mechanism

E-Money

Regular money

6

1. Risks to customers’ funds and mechanisms to reduce them

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

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1. Risks to customers’ funds and mechanisms to reduce them

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

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1. Risks to customers’ funds and mechanisms to reduce them

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

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2. Common law countries: we can use trusts (theory and practice)

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

Common law countries

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2. Common law countries: we can use trusts (theory and practice)

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

Common law countries

Establish a trustEstablish a trust

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2. Common law countries: we can use trusts (theory and practice)

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

Common law countries

Establish a trustEstablish a trust

Trust deed operates as a ‘rule book’Trust deed operates as a ‘rule book’

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2. Common law countries: we can use trusts (theory and practice)

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

Common law countries

Establish a trustEstablish a trust

Trust deed operates as a ‘rule book’Trust deed operates as a ‘rule book’

An ‘active regulator’An ‘active regulator’

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3. Civil law law countries: we need to use other mechanisms (theory)

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

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3. Civil law law countries: we need to use other mechanisms (theory)

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

Civil law countries

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3. Civil law law countries: we need to use other mechanisms (theory)

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

Civil law countries

FiduciaFiducia

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3. Civil law law countries: we need to use other mechanisms (theory)

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

Civil law countries

FiduciaFiducia

Mandate contractMandate contract

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3. Civil law law countries: we need to use other mechanisms (theory)

ProviderCustomer

Insolvency risk(eg pay

creditors)

Insolvency risk(eg pay

creditors)

Liquidity risk (eg Provider

builds a phone tower)

Liquidity risk (eg Provider

builds a phone tower)

Operational risk

(eg employee theft)

Operational risk

(eg employee theft)

Risk and Mechanism

E-Money

Regular money

Fund isolation

Fund isolation

Fund safeguarding

Fund safeguarding

Auditing and monitoring

Auditing and monitoring

Civil law countries

FiduciaFiducia

Mandate contractMandate contract

Direct regulation (legislation, insurance)

Direct regulation (legislation, insurance)

Protecting Customers’ Funds Michael Tarazi and Paul Breloff, Nonbank E-Money Issuers: Regulatory Approaches to Protecting Consumer Funds (CGAP, 2010)Kate Lauer and Michael Tarazi, Supervising Nonbank Mobile Money Issuers (CGAP, 2012)

Common law countries Jonathan Greenacre and Ross Buckley, ‘Using Trusts to Protect Mobile Money Customers’ (Singapore Journal of legal Studies, 2014)Jonathan Greenacre and Ross Buckley, Trust Law Protections for E-Money (PFIP/AFI, 2013)

Civil law countries David Ramos, Javier Solana, Jonathan Greenacre, Ross Buckley, The Regulation of Mobile-Money in Civil Law Jurisdictions: Protection of Customers’ Funds (currently being drafted)

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4. Additional Resources

Jonathan Greenacrej.greenacre@oxfordbusinessalumni.org

Ross Buckleyross.buckley@unsw.edu.au

David Munozdramos@der-pr.uc3m.es

Javier Solanajavier.solana@law.ox.ac.uk

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5. Discussion: Challenges regulators face when trying to protect

customers’ funds