A regulatory framework for informal remittance systems

1
A regulatory framework for informal remittance
systems

• APEC Symposium on Alternative Remittance Systems
• June 3, 2004, Tokyo
• Maud Bökkerink International Monetary Fund

2
IMFs work

• 2002 research project
• Informal Fund Transfer Systems An Analysis of
  the Informal Hawala System
• Main conclusions informal fund transfer (IFT)
  systems
• fill a critical gap
• could have macroeconomic consequences
• susceptible to use by criminals for money
  laundering and terrorist finance.

3
IMFs work

• 2003 Board Seminar
• Role of Fund
• to analyze and review compliance with AML/CFT
  standards
• to advise on how to upgrade and enhance
  regulatory and supervisory frameworks, and
• to assist in efforts to strengthen monetary,
  payment, and exchange systems to help reduce the
  incentives for transactions to be channeled
  through IFT systems

4
IMFs work

• Following up on
• FATF Special Recommendation
• APG Implementation Package
• Abu Dhabi Declaration (first Hawala conference)
• Second Hawala Conference
• develop guidance on a regulatory and supervisory
  framework for remittances systems
• document the regulatory practices and procedures
  adopted by various countries

5
Hawala Conference

• Variety of approaches by countries
• Remitting and receiving countries
• Systems
• Registration voluntary or by law
• Registration plus
• Licensing

6
Conference Outcome

• Challenges
• Overcome imperfect information on the functioning
  of IFT systems
• Ensure authorities have adequate resources in
  dealing with this issue
• Design regulatory solutions that are
  proportionate to the risks and sensitive to
  possible unintended consequences
• Avoid over-regulation that might drive IFT
  operations underground
• Demonstrate to the participants in IFT systems
  that the benefits of regulation outweigh the
  costs.

7
Conference Outcome

• To develop further guidance there is a need to
• Gather and analyse information on IFT systems and
  their operations
• Engage in a dialogue with IFT providers and users
  to develop constructive solutions
• Conduct outreach to raise the awareness of the
  regulated community and public to IFT issues and
• Remove any impediments to cost-effective,
  reliable and convenient transmission of funds in
  the regulated financial sector.

8
Perspective on regulation

• Remittances are very important to migrant workers
• Difficult to regulate without driving operators
  underground
• Regulations are not the panacea to avoid abuse
• Take account of local circumstances
  (conflictafflicted countries)

9
Perspective on regulation

• Regulatory structure should be appropriate to the
  risks
• Design a regulatory framework in consultation
  with private sector
• Create incentives

10
Elements to be considered

• Licensing or registration requirements
• Due diligence of owners and managers
• Implementation of AML/CFT requirements
• customer identification
• record keeping
• suspicious transaction reporting
• Compliance monitoring and sanctions
• Consumer protection
• Awareness raising and training

11
Thank you

• Maud Bökkerink
• mbokkerink_at_imf.org