key regulatory issues for money transfer to africa
TRANSCRIPT
Key Regulatory Issues for Money Transfers to Africa
Global Forum on Remittances 2009Tunis, Tunisia October 22-23, 2009
Emiko Todoroki
Senior Financial Sector Specialist
Financial Market Integrity
World Bank
To protect consumers/ customers
To increase transparency of remittance
flows
To create a level playing
field for competitive
markets
To counter abuse of
remittance channels by
criminals
Why do we need to regulate remittance transfers/RSPs?
Public Policy ObjectivesAML International
Standards
Addressing the Integrity Concern
Receiver
Sender
MTOs
Authorities
Misuse of remittance, poor access to financial servicesDisguise transfers, abuse of remittance channels
Inability to comply with FATF Recommendations
•Poor knowledge on remittance industry - - large informal flows
•Difficulty for efficient, low-cost oversight
•Non-bank players, use of payment gateway and technologies result in conflicting role among regulatory agencies
To facilitate
remittance flows to the
country
To achieve public policy objecti
ves
Challenge is how to design
well-balanced regulatio
n
Designing the Regulatory Framework
shift from informal flows to formal flows
Remove unnecessary barriers to regulation
Limited RSPs or products allowed in the market
Strong presence of exclusivity
agreements
Lack of or weak
AML/CFT regime
Existence of foreign
exchange control
Characteristics of Operating Environment in Africa
Service Providers:◦ Only banks (8 out of 50 surveyed countries in Africa)◦ Only banks and exchange bureaus (32 out of 50 surveyed
countries in Africa)
Services/Products◦ Mobile phone remittances (spreading fast) ◦ Other products such as stored value cards
Sources: ◦ IFAD, Sending Money Home to Africa, 2009; ◦ World Bank (FPDFI), Bilateral Remittance Corridor Analyses and AML/CFT Assessment of countries
Limited RSPs or Products allowed in the remittance markets in Afirca
The FATF Special Recommendation VI
The objective of SRVI is to increase the transparency of payment flows by ensuring that jurisdictions impose consistent AML/CFT measures on all forms of money/value transfer systems.
Licensing orRegistration
Money/value transmission
services are subjectto applicable Rec,
in particularRec4-11, 13-15,
& 21-23 and 9 SRs
Sanctions on money/value transfer services
without a license orregistration
Developed v.s. Developing Economies
Developed countries (42) Developing countries (82)
Largely -compliant
Partly compliant
Non-com-pliant
Varying levels of compliance with SR VI among Regions
Non-compliant
Largely-compliant
Partly-compliant
Africa MENA Asia &Pacific
EastenEurope
North andsouth
America
WestenEurope
SR VI: Money/value transfer services and SR VII: Wire transfer rules
Developing countries Developed countries
SR. VI
Absence of registration/licensing/ of all natural and legal persons providing money or value transfer services Presence informal money or value transfer servicesSupervision suffer from weaknesses
There is insufficient or no system for monitoring remittance services and ensuring compliance with the FATF Recommendations The scope of inspection policies and procedures and practice are not sufficient.
SR. VII
No existing/comprehensive law, regulation or other enforcement means regulating wire transfers
Inadequate implantation of requirements regarding obtaining and maintaining information with wire transfers. Absence of requirements to ensure that complete originator can be identified
Common Problems With SR VI & VII among developed and developing countries:
Registration or licensing?Registration Licensing
Definition Registering with/declaring to a designated competent authority
Obtaining permission from a designated competent authority
Issues • Raises few barriers• May encourage
participation
• Filters providers• May discourage participation• Better protects integrity and
soundness
Possible implications
• More RSPs’ participation would better help identify operators and regulate them.
• Expectation of less costly approach is not the case: resources for monitoring are needed as licensing approach
• High requirements for a license discourage more RSPs from being regulated. If the requirement for high capital adequacy exists, informal players may remain.
Selected countries’ approach to licensing/registrationJurisdiction Approach
United States Registration (Federal) for AML/CFT with the FIU and Licensing (State) for safety and soundness, and consumer protection
United Kingdom Registration of remittance service providers with the Customs (list of agents should be provided)
Canada Registration of remittance service providers with the FIU (list of agents should be provided)
Malaysia License (remittance service providers)
Indonesia License (remittance service providers) with a 2-year transition registration which ended in 2008
Jamaica License (both remittance service providers and their agents)
Haiti License (remittance service providers)
Nigeria Only banks are allowed
Uganda License – different levels of requirements for international, local MTOs and agents)
South Africa Authorized dealers only (banks and exchange houses) and Postbank
Lessons learned from regulating Alternative Remittance Systems (ARS)
Issues Responses
Determining a licensing or registration regime
Depends on the local circumstances, considering the objectives of the regulators and supervisory capacity.
Identifying who is operating a remittance business can be challenging.
Outreach to the ARS and awareness raising
Need for flexible, effective, and proportional regulations so as not to impose too much administrative and cost burden on remittance providers
Understand risks to help better regulate the market: risk-based approach
Regulations will need to be incentive-compatible, and their design will require engagement with the private sector.
Consultation with the private sector
Lessons learned from regulating ARS (Cont’d)
Issues Responses
Requirements to be clear and simple–for application process, background checks, on- and off-site monitoring, and compliance programs–annual renewal to facilitate close contacts
Increase compliance level of remittance service providers
Regulations that are simple to implement, effective, has buy-in of all stakeholdersTaking a gradual approach may be a key to success
Customer identification– Problems for undocumented workers– Threshold for CDD to kick in
Need for flexibility on documents accepted for identification Full CDD on a risk sensitive basis
Limited RSPs and Services/Products allowed
– Only banks, or banks and exchange bureaus– Mobile phone remittances and other card type products
Regulate non-bank players rather than limit playersAssess risks and regulate new products/services
• Policy Makers- AML/CFT should not hamper the development of m-FS. Regulation should be
targeted at creating a safe and sound market to promote financial inclusion.- All m-FS providers should be subject to AML regulations in accordance with
risk-based approach (i.e. Conduct risk assessment prior to legislating controls).
• Sector Regulators• Set clear licensing criteria and monitoring procedures that are commensurate
with services and risks. • Define transaction limits giving each m-FS providers flexibility to take
advantage of market opportunities.
• Supervisors• Include the associated risks into the scope of their on and off-site duties
• Private Sector• Consult with regulators on the development of new services• Introduce robust internal controls and risk management practices
Mobile Financial Services: Policy Recommendations
Ms. Emiko TodorokiSenior Financial Sector Specialist
Financial Market IntegrityThe World Bank
Email: [email protected]: (202) 458-9466
Fax: (202) 522-2433
For more information, please visit www.worldbank.org/remittancesandintegrity