Agent Supervision

Factors Impacting Agent Risk

FACTORS IMPACTING AGENT RISK
Provider experience with agent oversight
Provider resources (liquidity, capital and ability to scale)
Provider resources (liquidity, capital and ability to scale)
Types of services provided by agents (e.g., account opening, payments, transfers, loans)
Types of services provided by agents (e.g., account opening, payments, transfers, loans)
Agent collateral (e.g., whether agent operates on pre-funded basis)
Agent collateral (e.g., whether agent operates on pre-funded basis)
Location of agents (e.g., risks re: robbery, network connectivity, ML/TF)
Location of agents (e.g., risks re: robbery, network connectivity, ML/TF)
Technology used by agent (e.g., paper vs. electronic records, ability to electronically or biometrically verify customer identity)
Technology used by agent (e.g., paper vs. electronic records, ability to electronically or biometrically verify customer identity)
Agent Supervision

Materiality Tests For Agent Supervision-Test 1

Test #1: Risk approach at system level

Assessing whether agent supervision be a priority? If so, which topics should be emphasized? Considerations include the following:

Brazil & Mexico cases

  • What percentage of providers’ transactions are conducted by agents?
  • What percentage (and what type) of customer complaints are related to agents, as compared to other delivery channels and as a % of total complaints?
  • What risks are raised by the products delivered by agents?
  • How frequent and serious are media reports of problems with agents?
Agent Supervision

Materiality Tests For Agent Supervision-Test 2

Test #2: Risk approach at the institutional level

Which individual providers should be closely scrutinized regarding their agent business? Considerations include:

Brazil, Colombia & Peru cases

  • Number and geographic coverage of agents.
  • Number of customer accounts used at agents.
  • What risks are raised by the products delivered by agents?
  • Volume/value/types of transactions conducted at agents.
  • Types of services available at agents.
  • Relative importance of agents to the provider (e.g., % of total revenue, transaction volume/value, total accounts).
  • Complexity of agent network management arrangements.
Agent Supervision

Risk-Based Agent Supervision

  • Most supervisors do not assess risk of individual agents. Instead, they consider:
    • Provider’s internal controls and risk mitigation tools.
    • Market-level consumer, operational and ML/TF risks related to use of agents (less common).
  • Most supervisors see agent risk as lower priority, so onsite agent supervision is uncommon.
  • Several countries collect aggregate monthly and/or quarterly information on # of agents, volume/value/type of transactions, customer complaints and/or fraud/theft/data breaches.
  • Pakistan is an exception; it collects similar data on a monthly basis at the level of individual bank agents.
Source:

CGPA (2015)

Agent Supervision

Considerations

  • Regulators may first wish to consider whether to prioritize agent supervision by evaluating criteria such as the volume of agent transactions, volume of complaints through agent channels and risks raised by services provided through agents.
  • Regulators may also wish to consider the relative importance of agents to individual DFS providers to identify which providers should be most carefully scrutinized.
  • To facilitate these assessments, regulators could require providers to submit monthly or quarterly information on agents, transactions, customer complaints and fraud/theft/data breaches.
  • In most countries, agent-related supervision focuses on the provider’s internal controls and risk mitigation tools rather than on-site inspection of individual agents.
  • Adoption of RegTech tools by regulators offers the potential to improve the efficiency and efficacy of data collection, processing and analysis/visualization for agent supervision.