Making Remittances Work: Balancing Financial Inclusion and Integrity

This paper aims to assess current practices, draw lessons, and assist policy makers in designing an effective regulatory and supervisory framework governing remittance service providers (RSPs). The suggestions provided seek to meet the anti-money laundering/combating the finance of terrorism (AML/CFT) standards and also support a country’s overall financial inclusion objectives. Based on extensive research, including primary survey data from 26 countries, the paper covers the following sections in detail:

• Background of the Financial Action Task Force: the first international standard requiring the licensing or registration of money transfer businesses (MTBs);
• Overview of different remittance business models, types of agent networks, and review of international money transfer operators;
• Risks associated with remittance transactions with a focus on challenges while mitigating these risks, and guidance on mitigation measures;
• Overview of international standards governing MTBs and a discussion on how countries have been implementing these requirements;
• Registration and licensing of MTBs and prohibition of unauthorized remittance services;
• Shifting informal remittance service providers to formal providers, and the impact of competition on this sector;
• Analysis of various frameworks for MTBs;
• Policy objectives for achieving financial integrity and financial inclusion for the remittance sector with a focus on key recommendations for regulators and authorities.