Page 559 - IOM Law Society Rules Book

Multi-Premises or Franchised National Companies

These ARS are the next level in scale after the multinational companies. Within a
particular country or community, these businesses are a recognised brand. They tend
to support efforts to licence or regulate ARS services often have established and
effective methods for identifying their customers and reporting suspicious
transactions. ARS operators from this category servicing migrant workers in the
UAE, for example, have developed “membership” schemes to streamline and reward
frequent customers. This allows the ARS operator to conduct a high level of know-
your-customer (KYC) procedures when enrolling a customer, who is given a unique
number and photo identification card. Beneficiary names and, where possible,
account details are also embedded in the card data file. Monitoring this “account”
then allows the identification of suspect transactions against a profile of normal
activity. These operators will often act as franchisees of the multinational companies
but will also provide their own rival services. They tend to provide remittances to or
through banking channels, making use of electronic transfers or bank drafts.
Franchised national companies compete with banks and multinational companies by
knowing their market and using economies of scale to provide better exchange rates
or cheaper charges. This tier of ARS tends to be vigilant. Where they serve a
particular ethnic group or community they are well placed to identify normal levels of
transfer and so identify what is abnormal. The risks they face are similar to
multinational franchised operations. In addition, they are vulnerable to organised
smurfing which exploits the availability of rival companies servicing similar
communities.

Where they offer commercial services they can be abused in large scale frauds, either
as the remitting or receiving company. This means they have to be particular careful
to identify the source, destination and business reason for transactions. Cash is a risk
as with all ARS but bank to bank transfers via ARS in this tier are a particular risk.

Signed Shop-Front Premises (one or more premises)

These are familiar premises wherever ARS can operate legally. They generally serve
a particular ethnic community and provide it with a cost effective and valuable
service. They tend to be family run and are sometimes identified as “Mom & Pop”
operations within United States. They can provide a cost effective service by using
efficient settlement methods and making economies of scale on bank transfer costs.
They may use the services of another ARS to make transfers if this is most efficient.
Customers either make cash deposits at the shop-front premises or make payments
directly into the ARS provider’s bank account. Direct cash deposits into their bank
account help the shop-front ARS provider to streamline cash control, but there is a
risk that they do not truly know their customer. The ARS operator will have a series
of linked payment agents in the countries they serve. These payment agents may
range from similar operations to individual hawaladar. The ARS will use an
exchange rate agreed with their partner agents in the destination countries. These
rates will constantly fluctuate.

Settlement will be by a form agreed with the destination agent. This tier will be
particularly likely to use cash pooling accounts, back to back transfers and third party
payments. A family business of this nature is particularly vulnerable to money