How We Can Protect Customers ’ Funds in Mobile Money Systems

1. World Summit on Information Society Geneva, 29 April 2015 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)

2. Outline of Presentation • 1. 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

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

4. 1. Risks to customers’ funds and mechanisms to reduce them Regular money Customer Provider E-Money

5. 1. Risks to customers’ funds and mechanisms to reduce them Risk and Mechanism Regular money Customer Provider E-Money

6. 1. Risks to customers’ funds and mechanisms to reduce them Risk and Mechanism Fund isolation Insolvency risk (eg pay creditors) Regular money Customer Provider E-Money

7. 1. Risks to customers’ funds and mechanisms to reduce them Risk and Mechanism Fund isolation Insolvency risk (eg pay creditors) Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Customer Provider E-Money

8. 1. Risks to customers’ funds and mechanisms to reduce them Risk and Mechanism Fund isolation Insolvency risk (eg pay creditors) Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Customer Provider Operational risk (eg employee theft) Auditing and monitoring E-Money

9. 2. Common law countries: we can use trusts (theory and practice) Risk and Mechanism Common law countries Fund isolation Insolvency risk (eg pay creditors) Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Customer Provider Operational risk (eg employee theft) Auditing and monitoring E-Money

10. 2. Common law countries: we can use trusts (theory and practice) Risk and Mechanism Common law countries Fund isolation Insolvency risk (eg pay creditors) Establish a trust Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Customer Provider Operational risk (eg employee theft) Auditing and monitoring E-Money

11. 2. Common law countries: we can use trusts (theory and practice) Risk and Mechanism Common law countries Fund isolation Insolvency risk (eg pay creditors) Establish a trust Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Trust deed operates as a ‘rule book’ Customer Provider Operational risk (eg employee theft) Auditing and monitoring E-Money

12. 2. Common law countries: we can use trusts (theory and practice) Risk and Mechanism Common law countries Fund isolation Insolvency risk (eg pay creditors) Establish a trust Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Trust deed operates as a ‘rule book’ Customer Provider Operational risk (eg employee theft) Auditing and monitoring E-Money An ‘active regulator’

13. 3. Civil law law countries: we need to use other mechanisms (theory) Risk and Mechanism Fund isolation Insolvency risk (eg pay creditors) Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Customer Provider Operational risk (eg employee theft) Auditing and monitoring E-Money

14. 3. Civil law law countries: we need to use other mechanisms (theory) Risk and Mechanism Civil law countries Fund isolation Insolvency risk (eg pay creditors) Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Customer Provider Operational risk (eg employee theft) Auditing and monitoring E-Money

15. 3. Civil law law countries: we need to use other mechanisms (theory) Risk and Mechanism Civil law countries Fund isolation Insolvency risk (eg pay creditors) Fiducia Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Customer Provider Operational risk (eg employee theft) Auditing and monitoring E-Money

16. 3. Civil law law countries: we need to use other mechanisms (theory) Risk and Mechanism Civil law countries Fund isolation Insolvency risk (eg pay creditors) Fiducia Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Mandate contract Customer Provider Operational risk (eg employee theft) Auditing and monitoring E-Money

17. 3. Civil law law countries: we need to use other mechanisms (theory) Risk and Mechanism Civil law countries Fund isolation Insolvency risk (eg pay creditors) Fiducia Regular money Liquidity risk (eg Provider builds a phone tower) Fund safeguarding Mandate contract Customer Provider Operational risk (eg employee theft) Direct regulation (legislation, insurance) Auditing and monitoring E-Money

18. 4. Additional Resources • 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)

19. 5. Discussion: Challenges regulators face when trying to protect customers’ funds • Jonathan Greenacre j.greenacre@oxfordbusinessalumni.org • Ross Buckley ross.buckley@unsw.edu.au • David Munoz dramos@der-pr.uc3m.es • Javier Solana javier.solana@law.ox.ac.uk