Bangladesh - to fight terrorism, follow the money

The American film of 1970s titled All the President's Men popularised the idea that to find the source of corruption, investigators must "follow the money." In that spirit, the Counter Terrorism and Transnational Crime unit (just launched in Dhaka) has been formed to combat cybercrimes, terror financing and mobile bank related crimes. This is the right focus. While counter-terrorism efforts require comprehensive solutions, an essential tool in the fight is the ability to identify who is sending money within and across a country's borders. Clearly governments that fail to get this right, face enormous risks in terms of terror financing. Less frequently discussed is the issue that they also threaten the very promise of financial inclusion.
Counter-terrorism efforts and financial inclusion are inextricably linked. Smooth the path to financial services without considering AML/CFT (Anti-Money Laundering/Countering Financing of Terrorism) and access by bad actors becomes all too easy. On the other hand, stringent AML/CFT practices that do not address financial inclusion may cause societies to miss out on the social, economic and gender equity benefits that come from financial inclusion.
It is against this broader context that only a few companies have been working. GlobeOne is one such enterprise. Founded in California in 2013 by a group of socially-conscious entrepreneurs, GlobeOne has a mission to reduce global financial exclusion. Their worldwide research has led them to believe that the only real solution to this huge societal problem is to balance security needs while limiting hurdles for inclusion, and that answer can only exist within a bank-led model. Given what is at stake, banks are the only entities with the appropriate mix of business expertise and regulatory control to deliver the products and services people need.
In many cases around the world, financial institutions lack a supportive regulatory environment to take advantage of existing technology. For example, weighty 'know your customer' (KYC) regulations in many countries require in-person account opening, detailed paperwork, and identity verification that are nearly impossible for financial institutions to deliver to the poorest and most isolated consumers. These exist for purposes of AML/CFT, but they quickly become an obstacle to financial inclusion.
One promising solution is to allow basic biometric data, such as fingerprinting and facial recognition, as a form of KYC compliance. Biometrics represent an AML/CFT improvement while opening up opportunities for people who are financially excluded-in part because biometrics make products that enable mobile identity verification tools for financial inclusion. Importantly, Bangladesh Bank Governor Dr. Atiur Rahman has already acknowledged the potential for digital KYC (known as eKYC) solutions.
Fortunately, Bangladesh is leagues ahead of most countries in terms of having the infrastructure to achieve AML/CFT goals and financial inclusion simultaneously. The country's efforts to create a reliable national ID system in partnership with the World Bank and the country's willingness to link banks' KYC practices to the national database create significant opportunities.  Bangladesh has also taken biometric security a step further with the recent registration of mobile SIM cards that are linked to a national identity card database. This kind of regulation-coupled with the fact that unregistered SIMs are deactivated in six months-suggest that the legislative capacity exists to take on the regulation that supports eKYC.
Regulatory support is essential, but developing eKYC products at scale is an impractical endeavour for any individual financial institution, irrespective of its size. The solution is for technology partners to develop those products at scale. This is the thinking behind technology that embeds approved in-country, third-party verification software into mobile applications. This allows technology partners like GlobeOne to streamline costly activities like mobile customer acquisition, authentication and engagement on banks' behalf. These kinds of solutions are central to GlobeOne's objective to create equal access to a package of financial service products from member banks which include a transactional account, secure savings account, debit card, and a unique P2P marketing programme called SocialBoost, helping people to have greater control on their financial future (GlobeOne even offers complimentary life insurance to those who purchase their package from member banks). These solutions are also essential for governments to ensure safe access to financial services as well as monitoring money movement.
Sound eKYC practices present great promise for AML/CFT efforts and are a foundational component of financial inclusion. However, a second piece must be solved in order to maximise the potential of bank-led financial inclusion, which is for all of the key players in the financial services ecosystem to benefit from. There are many interdependencies in the world of financial inclusion-governments develop policies to encourage it, mobile network operators provide last mile reach, banks create the products and safeguard people's finances, corporate partners broaden utility and adoption through their supply chains, and micro and small merchants and individuals realise benefits of being part of the formal economy. All of these interdependent actors need the appropriate incentives to play their part effectively and to do so in ways that are consistent with counter-terrorism efforts.
The solution to this difficult equation is to develop products with commercial incentives built in. For GlobeOne, the mechanism that aligns those incentives is called SocialBoostTM, which allows individual members to earn income as they help to build the global GlobeOne community. When a member anywhere in the world generates interest revenue from the line of credit for the member bank, 50 per cent of it is returned to the community (25 per cent goes to the person or entity who signed up the revenue-generating member and the remaining 25 per cent is shared across the global community). For MNOs (mobile network operators) or merchants, that could mean they will continue to realise recurring revenue even if the GlobeOne member does not remain a customer of the MNO or the merchant. Meanwhile, corporations benefit when participants in their supply chains move from cash-only transactions to digital. The impact on inventory management, leakage and most importantly physical safety should not be underestimated.
To demonstrate the potential of the GlobeOne model to Bangladesh, GlobeOne undertook financial impact modelling based on published World Bank remittance data. The bottom line: the combination of SocialBoost revenues combined with GlobeOne'slow-cost P2P money transfer capability is projected to deliver Tk.6.6 billion to 1.2 million members by 2020.
By 2020 the annual benefit for each GlobeOne member in Bangladesh shall amount to approximately Tk.5,500 (US$68) delivered to the bank accounts of each individual member in Bangladesh. To put the gravity of the amount in context, this exceeds the monthly income of nearly half of Bangladesh's population today.
This is as urgent a situation as it has ever been. According to the World Bank, only 29 per cent of adults in Bangladesh had an account at a financial institution in 2014-this represents a decrease from 31 per cent in 2011. Whether there may be explanations that account for incremental shifts in these figures, we cannot ignore the fact that the data is heading in the wrong direction. At the same time, any AML/CFT policies that do not address the needs of financial inclusion, will quickly diminish the potential benefits by reducing access to financial services by those who need it most.
The writer is the Chief Business Development Officer of GlobeOne, a USA-based FinTec Organisation.
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