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18 October, 2018 12:39:40 AM / LAST MODIFIED: 18 October, 2018 08:02:51 AM

Post office MFS under scanner

High transaction limits thru ‘Nagad’ mobile financial services raise question
Rafiqul Islam Azad
Post office MFS under scanner

Bangladesh Bank is examining the operations of ‘Nagad’ of the Bangladesh Post Office that allows people to transact high amounts of money ‘through its yet unauthorised mobile financial services (MFS)’.

Nagad was launched earlier this month to render ‘digital financial services’ in order to help people send and receive cash with what it claimed to be additional security and control.

But the service allows its customers to cash in a maximum of Tk 250,000 per day, which is about 17 times higher than the central bank’s limit of Tk 15,000 per day for MFS conducted by 17 bank-led operators.

Earlier, the BB’s limit for MFS person-to-person transaction was maximum Tk 25,000 per day, which was later brought down to Tk 10,000 a day and now it is Tk 15,000.

According to a highly placed source in the Bangladesh Bank, Nagad, operated by Third Wave Technologies Limited (TWTL), has allegedly started operating as a mobile financial service (MFS) even though it did not take licence to operate MFS.

Third Wave Technologies is defining its service as ‘Digital Financial Services’, but in practice, it is virtually the same as a MFS, only without a valid licence, said the source.

The high amount of transactions through the MFS channel outside the central bank’s supervision might trigger ‘money laundering’, ultimately hitting the economy and social security, the source added.

“To reduce the risk of money laundering, we have set limits to transactions through MFS channels. But Nagad is transacting high amounts of money beyond the regulatory limit, which will increase the risk of money laundering,” the source added.

Meanwhile, the Payment System Department of the Bangladesh Bank (BB), responsible for supervising all payments under the country’s financial system, has written to the Anti-Money Laundering Department to address the issue and to give their views.

When contacted, Zakir Hossain Chowdhury, Operational Head of the Bangladesh Financial Intelligence Unit (BFIU) of Bangladesh Bank, confirmed that they had received a letter from the Payment Department of the BB, seeking their opinion on the Digital Financial Services of Nagad.

“The Payment System Department of BB on Monday sent us a letter seeking our opinion,” he said. Chowdhury further mentioned that the authorities did not take either permission or a no objection certificate (NOC) from them.

“We don’t know whether they have taken any licence or not. And before giving our opinion we have to check whether, as a government institution, they need to take any permission from BB to operate it,” he said.

He, however, said that if Nagad is allowed to transfer money through MFS, there should be a similar system applicable to other operators.

Sources in the BB said the central bank’s concerns centred mainly on mobile financial services offered by a non-bank service provider without valid licence from the financial regulatory body and its transaction limit that exceeds the limit set by the central bank for other MFS operators.

Nagad, operating under the Bangladesh Postal Act, is appointing agents at different places in the country to help people to send and receive money through the same agent network that 17 MFS operators use under the close supervision of Bangladesh Bank.

“Different limits for different players for similar services will distort the regulatory mechanism and will leave no level playing field for all operators,” a top central bank official said, adding that this will ultimately hit hard the fast growing MFS industry, which serves millions of people.

“The cause for concern is that the high limit of transactions will encourage financial criminals to launder money when organisations facilitating financial transactions are increasingly coming within the scope of anti-money laundering (AML) legislation worldwide,” he said.

“Nagad should not be any exception, as it deals with money transactions in real time. So, the fund flow through this channel should be under the central bank’s direct supervision,” he said, adding that as a department of the Ministry of Posts and Telecommunications, the Bangladesh Post Office is not officially regulated.

Mostaque Ahmed, Deputy Post Master General (DPMG) of the postal department, however, said the digital financial service they had launched was an updated version of the electronic money transfer service of the postal department.

He further said they had permission to transfer money but did not comment on the maximum transfer limit. He also did not clear whether they got the permission for operating as MFS.

In many countries, post offices play a vital role in boosting financial inclusion by encouraging the rural people to receive remittances and save money in their accounts with post offices. “But the outsourced business model of Nagad, which operates the postal service through a third party, is unprecedented,” a former senior official of the Bangladesh Bank told The Independent.

The official, however, said, “The rapid progress made in the financial inclusion front of Bangladesh since 2011 was due mainly to the impressive performance of MFS operators under strict regulatory supervision, consumer rights protection and a favourable regulatory environment. So, we can’t hurt this growth”.

“A level playing field must be ensured to get the benefits from innovations in financial inclusion, but no real-time financial operation is allowed in any economies without the direct supervisions of financial regulatory bodies,” the former regulator asserted.




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Editor : M. Shamsur Rahman
Published by the Editor on behalf of Independent Publications Limited at Media Printers, 446/H, Tejgaon I/A, Dhaka-1215.
Editorial, News & Commercial Offices : Beximco Media Complex, 149-150 Tejgaon I/A, Dhaka-1208, Bangladesh. GPO Box No. 934, Dhaka-1000.

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