Strengthening KYC: Context

There have been increased calls for tighter KYC (Know Your Customer) regulations across the financial and telecommunications sectors in recent years, not only in light of terrorist attacks in Europe, but also to combat fraud and money laundering.

While most of the Middle Eastern countries have tightened their Know-Your-Customer (KYC) regulations, many European nations have been slow to implement changes. While in Saudi Arabia fingerprints are requested for opening a bank account, and even a prepaid or postpaid mobile phone account is checked against Al Elm, a national database, in real time, the French regulator allows people to buy prepaid debit cards at thousands of convenience stores, with only minimal ID checks. Money transfer systems have been generally better at implementing KYC, but there is still more that could be done.

Pre-Paid Cards

Prepaid bank cards, which also facilitate the withdrawal of cash at ATMs, are an alternative to conventional payment cards, without the need for a bank account. Stamped prepaid Visa or MasterCard cards, equipped with a secret code, also allow purchases to be made in stores or online, just like conventional bank cards. However, unlike the latter, they are not immediately registered to a particular individual in a formal way, and more credit (cash value) can be added as and when necessary.

When sold by banks, prepaid cards are attached to a bank account and subject to the same regulations as conventional cards. However, since 2014, prepaid card and bank account packages in France have been available in 25,000 independent tobacco shops, or online, for around €20, with minimal ID checks. They can be recharged, in cash, at tobacconists, so tracing who actually has access to the funds they hold is unreliable. Accounts can be opened with fake IDs or photocopies, and there is little to stop multiple IBANs being purchased using the same ID, whether fake or genuine.

The cards can also be used to transfer money abroad. While this may be helpful to many, they are also convenient for those involved in fraud, money laundering, and criminal activities. At the time of writing, EU law permits prepaid cardholders to reload with a maximum of €2,500 over one year, without undergoing any kind of KYC. Single-use cards can be loaded with a maximum of €250 anonymously. On 2nd February 2016, the European Commission published an Action Plan for “strengthening the fight against terrorist financing”, outlining measures to balance the benefits offered by prepaid cards against the risks. The key theme in the Action Plan is how to better identify the cardholders of prepaid cards.

SIM cards

Regulations have been also introduced with regards to pre-paid mobile SIM cards. In Germany, Spain and Italy it is already a requirement that those purchasing pre-paid SIM cards provide ID documentation, and Belgium and Luxembourg agreed to introduce similar measures in 2016. Despite this, there have been concerns that even in countries where KYC is supposed to be strict, the rules are not always strongly enforced, and the collected data is not shared with law-enforcement agencies. This has lead to calls for tighter regulations in this sector.

Money Transfer

Money transfer has, for a number of years, used more robust KYC measures, but even here there is more that could be done. Ogloba has developed a platform that greatly facilitates money transfer transactions for both pre-registered and non-registered customers. The software allows collection of the required ID information, and communicates with the central application hosted by the largest money transfer companies, such as Western Union and MoneyGram.

In Belgium for example, chipped ID cards are issued to residents so, when transferring money, the user simply inserts this card into the EFTPOS. The card details are read by the EFTPOS, confirming the identity of the person making the transfer. This remove the need for identity documents to be scanned and verified, and other information to be keyed into the system by hand. This allows for fast, convenient money transfer, while ensuring it is very difficult for payments to be sent anonymously, or using fake ID documents.


While full details of new regulations will not be known until they have been formally announced, it is likely that the cost of implementing them will fall on the operators, rather than distributors and customers. They will therefore, be looking for cost-effective and secure solutions that are also convenient for their customers. Ogloba already offer industry-leading KYC solutions for SIM card purchases, pre-paid cards, and money transfer, and continue to develop innovative products and services for our partners and clients. While there may be opposition to stricter KYC regulations for operators, distributors, and customers, it is unlikely that the recommendations will be ignored, so it is time to choose a trusted, experienced, and expert KYC solutions provider.