Page 555 - IOM Law Society Rules Book

Alternative remittance systems (“ARS”)

ARS is defined as any system used for transferring money from one location to
another and generally operating outside the banking channels. ARS services range
from those managed by large multinational companies to small local networks and
can be of a legal or illegal nature and make use of a variety of methods and tools to
transfer the money.

The use of ARS for criminal purposes starts with a simple transaction designed to
dispose of criminal cash or obscure the audit trail for criminal money held in a bank
account. The investigation of these operations from the entry of the funds into the
ARS “retail outlet” to the ultimate beneficiary can, however, be characterised by a
high degree of complexity. This level of complexity is mostly due to intricate
settlement systems used and number of jurisdictions through which a transfer could
pass. Each jurisdiction might hold a part of the evidence or intelligence impacting on
the transaction. Therefore, obtaining an overall view of particular operations from
beginning to end is made more difficult. In order to understand

The Mechanisms of Alternative Remittance Systems

The systems used for alternative remittance can be considered as both simple and
complex. They are simple in that the individual components of the system involve
operations as basic as receiving cash for a transfer or communicating information on
individual payment orders. ARS can appear to be complex, as they may rely on a
series of seemingly unrelated operations at the clearing or settlement phase of the
process. ARS operations may in fact appear to be more complicated in certain
situations due to the lack of transparency inherent in certain types of systems. In any
case, most ARS activity is carried out in ways that are very similar to those used by
conventional banks to move funds. To examine the way the ARS work, it makes
sense to view such systems by looking at each of the various components or players in
this activity. This breakdown will make it easier to follow each phase in the
alternative remittance process.

The Originator of the Transfer

For the sending customer (the originator of the money/value transfer), a transaction
begins by the payment or handing over of funds to the ARS operator. At this point,
the originator also specifies the recipient or beneficiary for the transaction along with
his or her location. The funds can be paid in cash, cash equivalent, cheques, and
other monetary instruments or in stored value cards. In certain situations, the
originator may pay funds directly into a bank account belonging to or controlled by
the ARS operator. Cash remains the most prevalent form of funds at this stage. In
large ARS networks the customers generally have access to the ARS services through
local (sub)agents. The originator usually receives a unique reference to identify the
transaction. This is then passed to the beneficiary. The originator’s only other role
in the transaction will be to follow up with the originating ARS provider if the
beneficiary reports a failure of the transaction.