Mobile Banking Regulations

by Lenna Allen ; Updated July 27, 2017
Mobile banking is subject to different federal laws.

Throughout the years, there has been a considerable increase in the area of mobile banking. As technological developments paved the way for convenient and multifunctional handsets, people can now do as many things with their cell phones as with their computers. Not to mention, the increase in portability and access makes mobile banking a viable alternative. Consequently, as the number of consumers who use mobile banking increases, the federal government is imposing regulations to keep transactions in check.

USA Patriot Act

Financial institutions involved in mobile banking are obligated under the USA Patriot Act. That is, the law requires banks and similar financial entities providing mobile banking services to properly seek identification of parties availing themselves of the service and access. It’s important for the financial institution to accurately confirm the identity of their existing customer. Further, law requires financial institutions to initiate security protocols such as test questions and PIN for authentication. Changing phone numbers and addresses should also be noted at all times.

Money Laundering Regulations

Since mobile banking is heavily concerned with money transfers, internet banking and ACH, it is also subject to money-laundering regulations including the Bank Secrecy Act and Anti-Money Laundering Compliance Programs. The Bank Secrecy Act or BSA of 1970 requires financial institutions and businesses to monitor and preserve records that may be a reference for criminal activities. All records useful for investigations in regulations, tax evasion, terrorism and other criminal activities should be kept. Specifically, institutions with transactions exceeding $10,000 must complete form 8300 from the IRS and should file a Report of Cash Payments. Anti-Money Laundering Compliance Program, on the other hand, require financial institutions to comply with government investigations. Under the law, banks and similar entities ought to employ an officer to oversee transactions and see to it that records are maintained according to the compliance protocol of the government. Suspicious activities should be noted and reported when deemed necessary.

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Resolution of Disputes and Liabilities

Both financial institutions and mobile services providers are accountable to negotiate their liabilities and manage risk allocation. Basically, each party should ensure that their services are secure. For instance, under the law, financial institutions ought to properly complete and close transactions including issuance of credit cards, ATMs and other financial transactions. Mobile service providers, on the other hand, are classified under “limited liability,” thus they have no specific obligation aside from providing proper mobile services. However, when involved in mobile banking, the law seeks to reconcile security protocols in both financial institutions and mobile providers. Mobile carriers ought to employ fraud-detection procedures to add more security.

About the Author

Lenna Allen began her writing career for her college newspaper in 1999. Allen is a marketing specialist and freelance writer for several online publishers including eHow.com. Allen holds a Bachelor of Arts in communication and digital technology from Washington State University.

Photo Credits

  • mobile phone image by vashistha pathak from Fotolia.com
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