An increasing number of anecdotal reports about banks’ de-risking remittances service providers and the negative impact these actions have had on the industry have been circulating within the international financial community over the last few years.
Different sources have for instance reported that banks are supposedly cutting off access to banking services to money transfer operators (MTOs) because generated revenue isn’t sufficient to offset the cost of complying with AML/CFT and other requirements.
MTOs are crucial to the international remittances industry and provide relevant services for many migrants and their families. They also help extend reach and access to remittances and other financial services since they operate in many remote locations where banks aren’t present.
Apart from these anecdotal reports, there has been no substantiated and comprehensive data on how adverse the situation has become for MTOs and the global remittances market in general. The impact on remittance flows and costs has not yet been evident as so far MTOs have been able to continuously adapt their business model to the changing conditions of the market.
The G20 has tasked the World Bank to analyze the impact of the de-risking phenomenon on the remittances market.
We’ve prepared a survey to gather data on de-risking and remittances services in the G20 countries and are inviting stakeholders working in the remittances industry to participate. This work is being done with the support from the Bill & Melinda Gates Foundation.
We’ve sent the survey to governments, banks, MTOs and other commercial entities that work in the remittances industry, and are asking as many concerned parties as possible to take part. Participants will answer a set of general and tailored questions to analyze the situation, help us assess potential consequences de-risking activities could have on their business and better identify the real drivers of derisking.
We want to understand what is happening on the ground to help shape and improve policy response to this issue. This would ensure that all stakeholders can continue to play a role in this market and manage risks, so that the international remittance industry can continue to meet the needs of migrants and their families.
Considering that more than 250 million international migrants regularly send money back home, it’s important that remittance services continue to be accessible, affordable and efficient. Remittances transfers are already quite expensive and inefficient in many markets. The de-risking phenomenon may make it worse.
Also, if legal channels through which to send remittances are curtailed, it’s possible that these huge flows of money could be driven underground and channeled through illegal routes, which would create a potential for abuse by criminal organizations.
For these reasons, we invite everyone working in the remittances industry to participate in this survey and help us obtain relevant data to understand the nature and scope of de-risking and its effect on international remittances.
If you’re part of the remittances industry and would like to participate in the survey, please email us at paymentsystems@worldbank.org
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