Two jailed for London ATM crimes

A pair of criminals have received three year jail terms for fitting various London ATMs with card trapping devices and mobile phones for filming people entering their PIN numbers.

Gabriel Trifan and Cristenel Lazar, both from Romania, were found guilty of conspiracy to defraud at the Old Bailey having been arrested by the Dedicated Cheque and Plastic Crime Unit (DCPCU).

They were caught after tampering with cash machines in the Knightsbridge and Gloucester Road area, having fitted card-trapping devices to the ATMs, as well as positioning mobile phones above their keypads in order to film customers entering their PIN.

No customers suffered losses as a result of the scam, say police.

Detective Chief Inspector Paul Barnard, head of the DCPCU, says: "Trifan and Lazar had only been in the country for less than a week but, in that time, officers from the DCPCU were able to pinpoint their activity and arrest them. Concluding an operation so quickly and successfully, coupled with the length of sentence handed down today, sends a very strong message to those individuals prepared to carry out this type of crime."

SWIFT selected as primary messaging platform by Bank Indonesia

Bank Indonesia has selected SWIFT as primary messaging platform to access its second generation Real Time Gross Settlement (BI-RTGS) and Scripless Securities Settlement System (BI-SSSS).

SWIFT connects more than 60 high-value payment systems worldwide covering more than 90 countries, including five pan-regional initiatives (TARGET2, BCEAO, BEAC, COMESA and ECCB).

Implementation will start in the first quarter of 2011, pilot bank testing in the third quarter of 2011 and industry-wide testing in first quarter of 2012. Second generation BI-RTGS and BI-SSSS are expected to go live in the third quarter of 2012.

Bank Indonesia director of Accounting and Payment & Settlement System Directorate Ronald Waas said, most of BI-RTGS/BI-SSSS participating banks have been using SWIFT for their cross-border transactions to their correspondent banks for many years. By providing them with SWIFT as the platform to access second Generation BI-RTGS and BI-SSSS, the bank allow them to use a single window and the same standards for both domestic and cross-border transactions.

"This will enable straight-through processing, which in turn will reduce operational errors and increase processing efficiency,” Waas said.

Bank Indonesia will announce the vendor consortium that will develop the new middle-tier system to link with SWIFT by year-end.

Indonesia is the ninth country in the Asia Pacific region to choose SWIFT.

World Payments Report 2010

Global payments volumes continued to grow in 2009 despite impact of financial crisis. This is according to the 6th annual World Payments Report from Capgemini, RBS and Efma.

Covering Europe, North America and Asia, the “World Payments Report 2010” examines the latest trends in the global payments landscape including payments volumes and instruments usage as well as key payments-related regulatory initiatives such as SEPA/PSD, Basel III, Liquidity, Anti-Money Laundering (AML) and Anti-Terrorism Financing (ATF).

The report examines the accelerating transformation of the payments value chain including insights and strategic considerations regarding competitive and cooperative responses to the market environment from outsourcing to partnership strategies and payments hubs.

The World Payments Report 2010 draws on 13 executive interviews with 11 major banks and 2 clearing houses to balance global, regional and local points of view.

Key Findings from the 2010 World Payments Report

Global payments volumes continued to grow in 2009, despite economic pressure from the financial crisis. This followed a period of overall growth in non cash-payments which accelerated to 9% in 2008 from 7% in 2007. The rate of growth in non-cash payments volumes in 2008 was far faster in developing economies, such as China (29%), South Africa (25%) and Russia (66%), than in mature markets such as North America which had a growth rate of 4%. The report reveals that globally, cards remain the preferred non-cash payment instrument, accounting for more than 40% of payments in most markets and 58% globally.

The World Payments Report 2010 examines the latest trends in the global payments landscape including payments volumes and instruments usage as well as key payments-related regulatory initiatives and the consequent strategic challenges and options for banks.

Key findings include:

• The payments business has withstood the financial crisis well. Only time will tell the ultimate fallout, but initial data suggest payments volumes continued to expand in 2009
• Many concrete developments have taken place in the last year towards SEPA and PSD in Europe
• Regulatory pressures continued to affect the payments industry worldwide
• New technology and competition are making the payments universe more complex and expansive and the economic crisis as well as the response of the regulators is accelerating the evolution of the industry.

SWIFT plans sanctions screening outsourcing service for small banks

Financial messaging organization SWIFT says that it will improve the sanctions screening process designed to stop the flow of illegal money transfers by launching an outsourcing service for small banks.

Banks have come under increasing pressure to ensure that payments are screened against sanction lists and more than $1 billion worth of fines have been handed out to non-compliant banks over the last 18 months. However as the requirements for sanction screening has increased, many banks have struggled to cope with the resulting workload.

According to Luc Meurant, head of banking, supply chain and corporate markets at SWIFT, there is an opportunity for SWIFT to not only work on the standardization of sanction lists and the filtering process but also to offer an outsourcing service for smaller banks.

"Banks currently have three options - to do nothing; to do it all manually or to install software solution in-house. The benefit of the service is that there would be no footprint in their back-office. Banks would simply give us a list of names and a list of transactions," says Meurant.

SWIFT introduced a new message standard for cover payments in November 2009, the MT02 COV, designed to bring added transparency to the process. The new standard includes mandatory fields for originator and beneficiary details. Early in 2009 UK bank Lloyds TSB was fined $350m for deliberately removing customer information from payment messages in an effort to escape the sanctions filters of US banks.

However the process is still manually intensive and susceptible to high error rates. A recent survey of 214 payments professional by Dow Jones Risk and Compliance found that the vast majority (78%) of payment industry executives feel the new message standard has helped to reduce banks' exposure to money laundering and terrorist financing. However, concerns over data quality, false positives and duplicate alerts have significantly increased. As many as 41% of respondents admitted to being "very" or "extremely" concerned about the number of false positives.

According to Rupert De Ruig, managing director, Dow Jones Risk and Compliance, the issue is not with the messaging standard but with the sheer volume of work and the inconsistent quality of data supplied by national intelligence agencies. "Banks have more information to enter, more payments to screen and more names to screen against. And because a person's name is an imperfect identifier this creates a high number of false positives which have to be dealt with manually."

De Ruig believes banks are taking the issue of sanctions screening seriously and a number have moved to address the concerns by purchasing additional message filtering technology, although such investment is not evident throughout the industry, particularly among smaller banks.

SWIFT will be aiming its service at these smaller banks with less than 1,000 transactions per day. It is currently in the process of selecting a screening software provider for what will be a SWIFT -branded service and a formal proposal will be made to the SWIFT board in December.

Pending board approval, the service will be rolled out in the second quarter of 2011, possibly in two stages - firstly outgoing transactions and then incoming transactions. The project will initially focus on the Europe Middle East Africa (EMEA) region followed by Asia and Latin America.

SWIFT set for major network upgrade

Financial messaging organization SWIFT has announced a system upgrade, the first since 2007, for both SwiftNet and Alliance, its messaging and connectivity services respectively.

The new release, version 7.0, will be made available free of charge to all SWIFT customers under the conditions of their license agreements and will be rolled out on a gradual basis from December 31st 2010 until March 2012.

The new system will feature a Web-based graphical user interface and will be compatible with the latest software version such as Windows 7. It will also feature support for disaster recovery and a customer-hosted database.

Victor Abbeloos, product director at SWIFT, estimates the cost of the system upgrade as "100 staff hours" (roughly equivalent to $10m), a figure that is all the more significant given SWIFT 's stated intention to reduce its operating costs and also reduce the cost to its customers by 20%.

"We do have a 'lean programme' but at the same time our customers have an upgrade agreement as part of their license," says Abbeloos. "It is not just about cutting costs, it is also about being more efficient in order to deliver benefits to the customer."

SWIFT is currently in a pilot phase with 20 volunteer banks and the decision of when to upgrade will be at customers' discretion, says Abbeloos. However he stresses that unlike the two voluntary upgrades that were offered between 2007 and 2011 and accepted by less than 400 SWIFT customers, upgrading to version 7.0 will be mandatory.

" SWIFT is all about interoperability. Both sides of the transaction have to work with each other and need to be sure they are all on the same version and equally prepared. So by March 2012 every SWIFT customer will be on version 7.0"

SWIFT has also issued a 15% rebate on 2010 messages that will return approximately €50m to SWIFT users. The rebate, the first since 2008, will be paid in January 2011.

Financial Stability Board publishes principles to reduce reliance on Credit Rating Agency Ratings

The Financial Stability Board (FSB) believes that the use (or “hard wiring”) of Credit Rating Agency (CRA) ratings in regulatory regimes for banks and other financial institutions has contributed significantly to mechanistic market reliance on ratings. This in turn is a cause of herding and cliff effects from CRA ratings changes that can amplify pro-cyclicality and cause systemic disruption.

More widely however, the official “seal of approval” implied by the use CRA ratings in regulatory rules has contributed to an undesirable reduction in banks’, institutional investors’ and other market participants’ own capacity for credit risk assessment and due diligence.

The goal of the principles is to reduce mechanistic reliance on ratings and to incentivize improvements in independent credit risk assessment and due diligence capacity. Banks, market participants and institutional investors should be expected to make their own credit assessments, and not rely solely or mechanistically on CRA ratings. The design of regulations and other official sector actions should support this. Accordingly, authorities should assess references to CRA ratings in laws and regulations and, wherever possible, remove them or replace them by suitable alternative standards of creditworthiness.

The principles aim to catalyze a significant change in existing practices. They cover the application of the broad objectives in five areas:

• prudential supervision of banks
• policies of investment managers and institutional investors
• central bank operations
• private sector margin requirements, and
• disclosure requirements for issuers of securities.

The FSB has asked standard setters and regulators to consider the next steps that could be taken to translate the principles into more specific policy actions to reduce reliance on CRA ratings in laws and regulations. It recognizes that changes in market practices cannot happen overnight. This means incentivizing a transition to a reduced reliance over a reasonable timeframe extending into the medium term, taking into account the need for market participants to build up their own risk management capabilities to replace reliance on CRA ratings, and the particular circumstances of products, market participants and jurisdictions. Such actions have already been taken or are being considered by some international standard setters and in some jurisdictions. The FSB will monitor progress in this transition.

The FSB’s report was endorsed by G20 Finance Ministers and Central Bank Governors at their meeting in Gyeongju, Korea, on 22-23 October.

UAE becomes key mobile remittances gateway

The mobile money service market is growing at "a phenomenal pace" globally, and the UAE is emerging as a key mobile remittances gateway in the GCC region.

The region has a huge potential for growth as the governments and regulators are keen to promote transparent and secure money transfers by migrant workers, according to Luup, a provider of mobile money transfer solutions.

With an exceptionally large migrant population, the size of the remittance market in the GCC alone is nearly $50 billion, of which a sizeable portion is still going out of the region through the traditional corridor of hawala, said Morten Hofstad, Regional Director Middle East, Northern Africa and Asia, Luup. If regulators and government in the region follow the initiatives taken by the UAE authorities in discouraging hawala and to bring more accountability and transparency in remittances, 99 per cent of remittances by salaried migrants would be through mobile money transfer system, he said.

Apart from ensuring accountability and transparency in transaction, mobile money transfer solutions will be both cost effective and time-saving for migrant workers who can complete the transaction within seconds with just one command on their mobile phones, he said.

Luup has already singed up with Emirates International Exchange and other two exchange houses to provide this solution.

A report by analysts Gartner states that mobile money transactions will total $4.5 billion by 2012 globally. The estimated annual growth of remittances in the GCC region alone is pegged at over 20 percent in the next five years, said Hofstad,

The region also has one of the highest mobile phone penetration rates in the world, as mobile phones are a key tool for these mostly unbanked migrants. "Based on the region's potential, the Mobile Money Transfer, or MMT, conference is a great opportunity to share experiences and ideas that can pave the way for mobile money transfer initiatives globally," said Hofstad.

At the MMT Global Conference in Dubai on Tuesday, Luup highlighted how it is establishing the UAE as a key mobile remittances gateway by partnering with companies’ across
 the region.

In a speech given together with the National Bank of Abu Dhabi, Luup shared the successful case study of the first launch of international money transfer using MoneyGram via mobile phones in the Middle East. Luup also pointed to its strategy of expanding the ecosystem further by building partnerships with countries receiving remittances from the GCC region.