ACAMS Today sat down with Mr. Phaiboun Phongsavanh, CAMS to discuss Laos’ efforts toward anti-money laundering/counter-terrorist financing (AML/CTF) compliance and Phongsavanh Bank’s mobile money project. Mr. Phaiboun Phongsavanh is the CEO of Phongsavanh Bank in Vientiane, Lao People’s Democratic Republic (PDR). He oversees the direction and operations of the bank with a focus on regulatory compliance. Mr. Phongsavanh engages with international investment banks to set up correspondent banking relationships as well as implement the digital banking transformation that includes internet banking and mobile money. The project hopes to allow the rural populations more financial inclusion and access to the essential components of modern banking. He has a bachelor’s and a master’s degree from Monash University in Melbourne, Australia.
ACAMS Today: Laos graduated from the Financial Action Task Force (FATF) grey list in 2017. How has Lao PDR continued to improve its AML/CTF compliance?
Mr. Phaiboun Phongsavanh: After AML/CTF was declared as law in July 2014, Lao PDR came a long way in the journey of fighting organized crime and money laundering. Bank of the Lao PDR (BOL) has been proactively monitoring the progress of each bank and the regulator arranges professional training and seminars, along with ongoing regulatory supervision. In addition, a special task force has been set up where the financial intelligence unit (FIU) of BOL is working closely with the United Nations Office on Drugs and Crime (UNODC), the embassies led by the British Embassy and a few banks, including Phongsavanh Bank to lead the implementation of FATF Recommendations. Recently, BOL has also launched a risk-based assessment for anti-money laundering (AML) and Phongsavanh Bank is one of the four model banks in the country selected by the regulator to implement this methodology.
AT: Why is AML critical for Lao PDR’s foreign financial investment climate?
PP: An earlier World Bank Lao PDR Development report indicated that an additional 96,000 young people would be looking for jobs every year in the coming decades. Having more potential workers presents an opportunity for growth, but only if productive, income-generating jobs are available. While the government has focused on the role of education in skills development, the Lao PDR Development Report aims to identify what needs to be done to create more and better jobs for Lao PDR’s growing population. Foreign investments play a major role in developing the economy and help generate new employment opportunities. Therefore, Lao PDR and BOL are keen to provide assurance to foreign institutional investors (FIIs, including foreign sovereigns), where apart from a positive investment-friendly climate and legal framework, the commercial and financial sectors are strong enough to control organized crime and money laundering. The same sentiment is echoed by FATF—that weak financial controls have a dampening effect on foreign direct investments.
AT: What is Phongsavanh Bank’s role in Lao’s AML/CTF journey?
PP: Being the first private, locally owned bank in the country, Phongsavanh Bank best understands the social fabric of the nation. Our bank has been supporting the government on several strategic social causes. Building trust for foreign investors and partners goes a long way in building the infrastructure that is much needed for the development and prosperity of our nation. Phongsavanh Bank pioneered automated AML screening solutions such as World Check and SWIFT Alliance Lite2 to identify, monitor, control and report AML breaches. Also, we have been partnering with BOL and UNODC at a national level on strategic AML initiatives, including sharing our training resources. Overall, Phongsavanh Bank aims to be a market leader in the AML/CTF arena.
AT: What advice for maintaining AML/CTF compliance do you have for financial institutions (FIs) in Laos?
PP: Typically, there is some minimum investment needed to implement AML/CTF compliance. This can significantly affect the cost-benefit dynamics of implementing such compliance mechanisms. Therefore, banks may not be motivated to invest in compliance. This is more so for local banks, which do not have the benefit of extending the software that international banks already use in their parent country. In such a scenario, it is important that we upgrade our understanding of these compliance requirements to the extent that we are fully in control of potential AML breaches, despite using in-house semi-automated transaction monitoring tools.
AT: How does the Association of Certified Anti-Money Laundering Specialists (ACAMS) fit within your AML development program?
PP: In line with the previous response, it makes economic and commercial sense for small- and medium-sized banks to invest in learning and developing the skills needed for AML programs. The globally renowned Certified Anti-Money Laundering Specialist (CAMS) certification gives the right comfort to our bank’s shareholders, board of directors and management—as well as external stakeholders like BOL, Lao PDR government and foreign investors—that our staff has the right skills to keep Phongsavanh Bank safe and compliant with AML/CTF regulations.
AT: Why is the facility of internet banking important to Laos and its citizens?
PP: Internet banking facilities provide users the convenience of efficient banking anywhere and at any time. The mobile penetration in Laos is impressive at 5.65 million subscribers, which covers around 81% of the population. Furthermore, the internet usage penetration stands at 37% with 2.6 million active internet users. This would essentially mean that the infrastructure for internet banking usage is good to start with and it is growing at 13% annually. Add to this the low penetration of brick-and-mortar branches, which represent one commercial bank branch for every 40,000 people in the country. Also, the distribution of commercial banks in the country is skewed because 21 out of the 42 (50%) commercial banks are present only in the national capital region.1
The above data clearly indicates that internet and mobile banking is the way forward to reach customers with minimal spread of brick-and-mortar branches. Coupled with the mobile wallet platform, which can bring the unbanked customers online, the digital duo of wallets and internet banking can effectively reach the Laos population in a cost-effective and efficient manner.
AT: What are the goals for Phongsavanh Bank’s mobile money project?
PP: Phongsavanh Bank seeks to launch mobile money services to address the core unmet needs of consumers around security and convenience of payments through a technology-led business model, whilst achieving ubiquitous market presence and visibility through agent and merchant partnerships. It is expected to serve the noble social development goal of financial inclusion, as it encompasses both the banked and unbanked segments of the population.
AT: Do you foresee challenges in implementing the mobile money project and financial inclusion in rural populations, and if so, how can Laos overcome these challenges?
PP: Implementing mobile money for financial inclusion, trust and awareness by users are significant challenges for mobile money penetration. Phongsavanh Bank will differentiate itself by offering a compelling product value proposition rendered through intuitive digital and assisted interfaces and will seek to provide a safe, convenient, reliable and affordable usage experience to a cross-section of users. Access to the rural population will be achieved by establishing a vast agent network as a hub and spokes model affiliated to the nearest bank branches. A robust merchant ecosystem and penetrating the microfinance and the value chain in agriculture will be the other areas where mobile money is expected to make an impact.
AT: As an FI, where can I learn more about the mobile money project?
PP: Phongsavanh Bank has a competent mobile money team who would be happy to discuss the project with all interested parties.
Interviewed by: Dr. William Scott Grob, CAMS, AML director, ACAMS, Hong Kong, email@example.com
ACAMS editorial staff, ACAMS, Miami, FL, USA, firstname.lastname@example.org
- “Digital 2019 Laos,” SlideShare, February 9, 2019, https://www.slideshare.net/DataReportal/ digital-2019-laos-january-2019-v01