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15 July, 2020 07:21:22 PM / LAST MODIFIED: 15 July, 2020 07:57:43 PM

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Experts want KYC-based MFS accounts to prevent fraud in aid fund disbursement

Rafiqul Islam Azad, Dhaka
Experts want KYC-based MFS accounts to prevent fraud in aid fund disbursement

With the detection of anomalies in the list of poor people eligible for government aid during the ongoing Covid-19 pandemic and subsequent difficulties in fund disbursement, payment industry experts see KYC-based MFS accounts as the ultimate solution to reach the target group.

If the mobile financial services (MFS) accounts are opened in line with the prescribed KYC (know your customer) process it will surely mitigate duplications or frauds and thus ease difficulties in fund disbursement, they explained earlier this week.
KYC process includes verification of NID and documents such as utility bills as proof of address alongside the biometric verification.

Prime Minister Sheikh Hasina on May 14 this year inaugurated the disbursement of Tk 1,250 crore cash assistance for 50 lakh poor families hit hard by the coronavirus pandemic through MFS providers such as bKash, Rocket, Nagad and SureCash. 

But the Ministry of Finance found massive irregularities by many of the regional bodies formed to prepare the roll of recipients.

Nagad, a joint venture of the Post and Telecommunications Division and a private firm, disbursed Tk 425 crore, while market leader bKash disbursed Tk 375 crore, Rocket Tk 250 crore, and SureCash Tk 200 crore, sources in the Ministry of Disaster Management and Relief said.

The sources said nearly 28 lakh people having saving certificates or enjoying government pension funds or are government employees were listed as ultra-poor but they were eventually delisted at different stages that made the process cumbersome.

However, most of the listed individuals did not have any MFS accounts. Hence, mobile accounts were opened by the MFS providers based on NID number matched with date of birth and name from the Election Commission database. 
Considering the urgency of the matter, Bangladesh Financial Intelligence Unit (BFIU) under Bangladesh Bank had allowed deviation from the KYC protocol mandatory for opening MFS accounts.  

“KYC is a process by which banks/MFS providers obtain information about the identity and address of the customers.

This process helps to ensure that bank/MFS services are not misused. Once MFS accounts are opened ignoring KYC rules, people can take advantage of including their near and dear ones in the list of poor people,” said a senior official of the central bank. 

To avoid fraud and duplication, according to the BB senior official, the recipients’ roll must be prepared in accordance with the accounts registered on the basis of e-KYC/paper KYC. “Once the list is prepared based on registered MFS account numbers having KYC, no discrepancy can take place.” 

The official continued: “In such system, no can receive duplicate disbursement, as one individual can open only one account with one MFS provider”.

Dr Shahadat Khan, CEO of SureCash, said the good thing is that the government has realised that the aid disbursement through MFS channel is more secure, transparent and convenient than traditional channels. 

“MFS providers have helped the government to identify fraud and inappropriate recipients,” he added.

Saying that there is room for manipulation of the list of recipients even through bank accounts, payment experts observed that similar efforts in the past had failed for the obvious inconveniences attached to such initiatives.

“The government can mitigate duplications/frauds in aid disbursement using MFS accounts opened through prescribed KYC process,” said a BFIU official. 

“If such actions are ensured, then the disbursement will land in active accounts leaving no scopes for its misappropriation,” said the official of BFIU, the country’s central agency responsible for analysing suspicious transaction reports (STR) and regulating banks and MFS providers to open accounts in line with KYC protocols. 

According to a Finance Division study paper, conducted by Maxwell Stamp Plc under the Strengthening Public Financial Management for Social Protection (SPFMSP) project, inadequate monitoring along with unsatisfactory beneficiary identification mechanisms often leave scope for duplicate and fraudulent payments.

“Any effective payment solution in the context of Bangladesh needs to empower the beneficiaries to be able to make informed choices, be cost-effective and transparent. It also needs to be backed by a modern technology-driven unified coordination and supervision mechanism over all the available modes of payment in the country,” suggests the report.

HM

 

 

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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.

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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