Page 558 - IOM Law Society Rules Book

predominant currency. Money is transferred into the cash pooling account from
customer transactions and used by the originating ARS provider. The value remains
to the credit of the destination ARS provider. The originating ARS provider can use
the money to settle past, current or future transactions anywhere in the world. These
settlement transactions may be effected by making personal or commercial
remittances. This allows a great deal of flexibility in pricing and completing
transactions in a variety of currencies.

TYPOLOGIES

Categories of Alternative Remittance Systems

The cases available show that some uniform categories of ARS are identifiable based
on the structure of the business. The relevant categories are the following:

• Franchised multinational companies
• Multi premises or franchised national companies
• Signed shop-front premises (one or more premises)
• Overt ARS within another business
• Covert ARS within another business
• Covert ARS – no premises

Franchised Multinational Companies

This category includes ARS products offered by various large and often well-known
international corporations that provide money transfer service through franchises.
These operators tend to have a high degree of compliance with local legislation, also
by providing effective procedures to prevent misuse. This is reflected in the relative
expense of the service. The providers are household names, and their services are
accessible around the world.

With franchised multinational companies, there is a fixed fee structure, and exchange
rates used are often less competitive. These operators provide an accessible, quick
and reliable service. They are undercut by a whole range of ARS operators but are
still used by ordinary customers in preference to other ARS operators. This is an
indication that some ARS customers value a reliable and legitimate service above
other factors in selecting an ARS provider. They have sophisticated computer
systems to ensure transactions are completed accurately and to prevent fraud against
their services. All transactions can be traced, and they tend to have clear policies on
identifying customers and reporting suspect transactions. Multinational companies
are increasingly providing online and remote payment services. This increases the
volume of transactions to be examined for detecting suspicious activity and may lead
to problems in defining risk. Online services require use of bank accounts that
provide a better audit trail. Terrorist financing through this form of ARS will be
difficult to identify. Embedded terrorist groups will be able to provide identification,
and the amount transferred by each individual element of a terrorist operation will not
lead to suspicion. The computerised tracking systems do however mean that historic
transactions can be scrutinised effectively.