IMF, ADB, Australia and New Zealand Seek Solutions to Reduce Remittance Costs in the Pacific
The International Monetary Fund, together with the Asian Development Bank (ADB), held roundtables in Sydney on February 5 and Auckland on February 7-8 to identify practical solutions to address the costs and risks of transferring remittances to Pacific countries and difficulties in undertaking cross-border transactions. The events were financially supported by the governments of Australia and New Zealand.
Remittance flows and correspondent banking relationships (CBRs), including for trade finance, are essential to facilitate trade, promote economic activity and support incomes in the Pacific. However, following the tightening of global standards on anti-money laundering and combatting terrorism financing (AML/CFT), access to cross-border financial services has become difficult for some Pacific Island countries due to high costs and pressure to close the bank accounts of money transfer operators (MTOs) who send and receive remittances.
As a result, cross-border remittance flows and CBRs have become more concentrated or have been maintained through alternative arrangements in a number of Pacific islands, increasing the financial fragility for these countries. These fragilities could undermine growth and financial inclusion prospects by increasing the cost of financial services or limiting access, reducing trade, and making it more difficult for Pacific islanders living and working in Australia and New Zealand to send money to family in the islands.
The roundtables brought together banks and MTOs from Australia, New Zealand and the Pacific, Australian and New Zealand regulators, senior officials from international financial institutions and training providers to discuss the issue and focus on practical solutions.
Finding solutions will require concerted action by all parties. Participants agreed that the roundtables were a first step to better understand issues and reduce misperceptions. A regular dialog on industry-led solutions may be needed to improve transparency and promote best practices for MTOs. Effectively implementing robust regulatory and supervisory frameworks and enhancing the AML/CFT controls of banks and due diligence in MTOs could help improve access. This could be aided by greater training and capacity building, and a focus on automation and technology including databases to improve customer due diligence. Better information sharing by Pacific island regulatory and supervisory authorities, as identified by the ADB’s national risk assessments would also help. International financial institutions and training bodies (including the Asia Pacific Group and national regulators) should work together to provide more coordinated and targeted assistance to affected countries, regulatory and supervisory authorities, banks and MTOs.
A follow up meeting will be held with Pacific Island authorities in Tonga on March 26, 2018 to discuss feasible solutions and training needs for Pacific regulatory and supervisory authorities, banks and MTOs. We will continue to work with participants on solutions and will reconvene to assess progress in around a year’s time.
IMF Communications Department
PRESS OFFICER: RAPHAEL ANSPACH
PHONE: +1 202 623-7100EMAIL: MEDIA@IMF.ORG