A comparative analysis of the prepaid card laws/regulations in Nigeria, the UK, the USA and India
| Published date | 01 October 2018 |
| Pages | 481-493 |
| Date | 01 October 2018 |
| DOI | https://doi.org/10.1108/JMLC-03-2017-0010 |
| Author | Ehi Eric Esoimeme |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
A comparative analysis of the
prepaid card laws/regulations
in Nigeria, the UK, the USA
and India
Ehi Eric Esoimeme
Cardiff University, Cardiff, UK
Abstract
Purpose –This paper aims to compare the prepaid card laws/regulationsin Nigeria, the UK, the USA and
India with the aim of determining the best approach to regulating prepaid cards, that is the approach that
promotesfinancial inclusion and also makes the productless attractive for money laundering.
Design/methodology/approach –This paper relies mainlyon primary and secondary data drawn from
the public domain.It also relies on documentary research.
Findings –This paper makes the following findings and recommendations:Nigeria has the best approach
to regulating providers of prepaidcards. Nigeria’s approach could foster financial inclusion and at the same
time mitigate the money launderingrisks associated with prepaid cards. Nigeria’s approachis not too strict
like the Indian approach and it is not too relaxed like the UK and the USA approach. Operators, including
mobile/telecommunicationsoperators, wishing to operate money transfer schemes in Nigeria are allowed to
do so with approval from the Central Bank of Nigeriaand in strict conjunction with licensed deposit-taking
banks or financial institutions. The UK, the USA and India are recommended to adopt Nigeria’s approach.
The UK and the USA have the best approach to regulating agents of prepaid cards.Both countries require
prepaid card providers to maintain a currentlist of agents and make it available to the relevant authorities
upon request. The approach allows regulatory agencies to effectively monitor and supervise prepaid card
agents. India and Nigeria are advised to clarify their approach regarding the regulation of prepaid card
agents. The prepaid card laws/regulations of those countries should be modifiedto specify if the agent of a
prepaid card provideris required to be licensed or registered by a competent authorityor if the prepaid card
provider (the principal)is required to maintain an updated list of agents which must be made accessibleto a
designated competent authority, when requested. The new changes will afford regulatory authorities the
opportunity to effectively monitorand supervise prepaid card agents. India’s approach to thresholds would
preclude most individuals in the intended target market from accessing basic financial products, as most
people typically do not have residential addresses that could be confirmed by reference to formal
documentation.India should adopt the “risk-basedapproach”and not the “wholesale de-risking approach”.
Research limitations/implications –Given their low-risk characteristics, closed-loop cards, specifically
cards which do not allow reloads or withdrawals, remain outside the scope of this paper.
Originality/value –Although there have been researchers who adopted the comparative approach like
Jean J Luyat and Will Cain, the comparative approach adoptedby those researcherswas not detailed enough
and also was not aimed at seeking to answer the research question in Section 1 of this paper. Both writers
focused on only the aspect of financial inclusion making the whole research a one-sided approach. Jean J
Luyat focused on “how regulationhad an impact on the development of prepaid cards in Japan and Europe”.
He was able to discover that prepaid cards were growing rapidly in Japan but not gaining acceptance as a
payment methodin the European Union (EU) and France. He aligned such growth in Japan to different factors
including regulation. He stated that Japan had a simple and flexible regulatory framework compared to the
EU and France which have a complex regulatorysystem with strict prudential requirements. Nothing was
said about the money laundering aspectof such regulation and neither was anything said about thresholds
and other optional recommendations canvased by the Financial Action Task Force. The Electronic Money
Directive referredto by Jean J Luyat has alreadybeen repealed and a second Electronic Money Directive is in
place. A comparative approachis adopted in this research seeking to compare the approach in Nigeria with
Comparative
analysis of the
prepaid card
laws
481
Journalof Money Laundering
Control
Vol.21 No. 4, 2018
pp. 481-493
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-03-2017-0010
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