1. How We Can Protect Customers’ Funds in Mobile Money Systems Jonathan Greenacre (Oxford University) Professor Ross Buckley (UNSW) Dr David Ramos Muñoz (Universidad Carlos III de Madrid) Javier Solana (Oxford University) World Summit on Information Society Geneva, 29 April 2015

2. 2 Outline of Presentation 1. The issue: risks to customers’ funds and mechanisms to reduce them 2. Common law countries: we can use trusts to provide these mechanisms (theory and practice) 3. Civil law countries: we need to use other legal instruments to provide these mechanisms (theory) 4: Additional resources 5. Discussion of regulators’ challenges when protecting customers’ funds

3. 3 1. Risks to customers’ funds and mechanisms to reduce them Customer

4. 4 1. Risks to customers’ funds and mechanisms to reduce them ProviderCustomer E-Money Regular money

5. 5 1. Risks to customers’ funds and mechanisms to reduce them ProviderCustomer Risk and Mechanism E-Money Regular money

6. 6 1. Risks to customers’ funds and mechanisms to reduce them ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Risk and Mechanism E-Money Regular money Fund isolation

7. 7 1. Risks to customers’ funds and mechanisms to reduce them ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding

8. 8 1. Risks to customers’ funds and mechanisms to reduce them ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring

9. 9 2. Common law countries: we can use trusts (theory and practice) ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring Common law countries

10. 10 2. Common law countries: we can use trusts (theory and practice) ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring Common law countries Establish a trust

11. 11 2. Common law countries: we can use trusts (theory and practice) ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring Common law countries Establish a trust Trust deed operates as a ‘rule book’

12. 12 2. Common law countries: we can use trusts (theory and practice) ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring Common law countries Establish a trust Trust deed operates as a ‘rule book’ An ‘active regulator’

13. 13 3. Civil law law countries: we need to use other mechanisms (theory) ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring

14. 14 3. Civil law law countries: we need to use other mechanisms (theory) ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring Civil law countries

15. 15 3. Civil law law countries: we need to use other mechanisms (theory) ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring Civil law countries Fiducia

16. 16 3. Civil law law countries: we need to use other mechanisms (theory) ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring Civil law countries Fiducia Mandate contract

17. 17 3. Civil law law countries: we need to use other mechanisms (theory) ProviderCustomer Insolvency risk (eg pay creditors) Insolvency risk (eg pay creditors) Liquidity risk (eg Provider builds a phone tower) Liquidity risk (eg Provider builds a phone tower) Operational risk (eg employee theft) Operational risk (eg employee theft) Risk and Mechanism E-Money Regular money Fund isolation Fund safeguarding Auditing and monitoring Civil law countries Fiducia Mandate contract Direct regulation (legislation, insurance)

18. Protecting Customers’ Funds Michael Tarazi and Paul Breloff, Nonbank E-Money Issuers: Regulatory Approaches to Protecting Consumer Funds (CGAP, 2010) Kate Lauer and Michael Tarazi, Supervising Nonbank Mobile Money Issuers (CGAP, 2012) Common law countries Jonathan Greenacre and Ross Buckley, ‘Using Trusts to Protect Mobile Money Customers’ (Singapore Journal of legal Studies, 2014) Jonathan Greenacre and Ross Buckley, Trust Law Protections for E-Money (PFIP/AFI, 2013) Civil law countries David Ramos, Javier Solana, Jonathan Greenacre, Ross Buckley, The Regulation of Mobile-Money in Civil Law Jurisdictions: Protection of Customers’ Funds (currently being drafted) 18 4. Additional Resources

19. Jonathan Greenacre j.greenacre@oxfordbusinessalumni.org Ross Buckley ross.buckley@unsw.edu.au David Munoz dramos@der-pr.uc3m.es Javier Solana javier.solana@law.ox.ac.uk 19 5. Discussion: Challenges regulators face when trying to protect customers’ funds