For law enforcement, regulators and financial institutions who have microlenders in their client pool, risk considerations should include:

  • Transfers to, from, and between high risk geographies (and adjacent areas) with little oversight
  • The minimal due diligence required for microloan donors and recipients
  • Assuming a legitimate business purpose as a mitigating factor for transaction review
  • The nature of microloans… small-amounts-transactions that inherently fall below reporting thresholds
  • No collateral-backing required for loan transactions which creates high default rates, - an appealing prospect for terrorist financiers
  • Potential for diversion of funds once they reach the destination
  • False representation of loan recipients
  • Use of correspondent banks with complex, non-transparent ownership structures in high risk geographies to disburse funds