Page 88 - ACAMS-Today-V20N3

[ STAFF NOTES ]
Digital payments can help streamline transactions, cut down on costs for businesses, reduce tax evasion and deter organized crime
An old new idea
In August 2019, The Economist reported that operating in cash costs countries 0.5% of their gross domestic product (GDP) every year.4 For centuries, cash has been the main means available to conduct transactions instantly and reliably since it was tangible, fungible and universally understood as a means of payment.
The credit card industry may have been one of the first advocates of a cash-free society. The introduction of contactless payments has shown the benefit of hassle-free transactions. In March 2021, the Financial Conduct Authority (FCA) in the U.K. increased the single transaction contactless payment threshold from 45 pounds ($62.50) to 100 pounds ($138.89) and from 130 pounds ($193.06) to 300 pounds ($416.67) for multiple transactions.5 The FCA implemented these changes in “response to [the] changing [of customers] behaviour and the coronavirus pandemic.” During the same period, DigitalEurope, the leading trade association representing digitally transforming industries in Europe,6 recommended to “limit COVID-19 transmissions to encourage the use of contactless cards and mobile payments” and to that end, the rise in contactless transactions.7 The European association believed that the transmission of COVID-19 via the use of a chip and a pin could be limited as a result. At an international level, the United Nations is also promoting the acceleration of the transition from cash to “respon- sible digital payments” in the name of public health.8
The continued popularity of cryptocurrencies may also pose an alternative to fiat currencies. Governments around the world are responding to the concept of “virtual” money by devel- oping their own central bank digital currencies (CBDCs). CBDCs can offer advantages that cash cannot, such as traceability, which is its main selling point to deter money laundering.9 Digital payments can help streamline transactions, cut down on costs for businesses, reduce tax evasion and deter organized crime.
Concomitantly, new technologies have brought innovative ways to make transactions, removing further the need to use banknotes and legislative frame- works are designed to enhance scrutiny on large amounts of cash transactions―― known to be attractive vehicles for money launderers. This move has meant an increased reliance on digitally originated payment methods that correlate to a surge in innovative financial crime activities as well.
Following national lockdowns, countries such as the United Kingdom (U.K.) have seen a significant surge of fraud scams related to online payments. In 2020, the total loss due to fraud in the U.K. was estimated at 1.26 billion pounds ($1.75 billion), according to UK Finance.1 A digital economy is even more vulnerable to cyberattacks. In March 2019, Capital One was hacked by what is considered “one of the biggest data breaches ever” giving access to more than 100 million Capital One customers’ accounts and credit card applications.2 The cost of the hack was estimated between $100 million and $150 million, including customers’ notifications, credit monitoring, technology and legal support costs, triggering the company’s stocks to decrease by 5%.3 Thus, the cashless society needs new and innovative ways of detecting and preventing financial crime.
88 [ JUNE–AUGUST 2021 ]