Why are informal value transfer systems (IVTS) considered a money laundering risk?

Informal value transfer systems (IVTS) are considered a money laundering risk primarily because they operate outside of formal banking systems. This characteristic allows them to bypass the standard regulatory frameworks and oversight that govern financial institutions. Without the scrutiny of traditional banks and regulatory bodies, transactions conducted through IVTS can be more difficult to trace and monitor, making it easier for illicit funds to be moved undetected.

Additionally, the lack of formal documentation and reporting requirements inherent in these systems creates vulnerabilities that money launderers can exploit. This circumvention of established regulations heightens the risk of facilitating money laundering activities, as there are fewer safeguards in place to identify and report suspicious transactions.

The other options reflect characteristics that do not contribute to the perceived risks associated with IVTS. They are not easy to regulate and control, they lack transparency, and while some IVTS may deal in small amounts of money, this does not inherently reduce the risk of money laundering. The key issue remains their operation outside formal institutions, leading to a greater likelihood of abuse for illicit purposes.