Local officials have raised concerns over recent rules in the United States, which may constrict the flow of remittances to the Philippines, threatening the country’s largest source of dollars.
Several American banks have scaled back their money transfer businesses amid money laundering concerns, which have prompted regulators to keep a closer watch on cross-border transactions to countries like Mexico and parts of Africa.
“We will be monitoring developments on this front to see how we can explore, if needed, other possible ways to facilitate money transfers,” Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said this week.
Last year, expatriate Filipinos remitted the equivalent of over 8 percent of the country’s gross domestic product (GDP). This year, remittances are expected to grow by at least 5 percent to a record high of $24 billion.
Latest data showed remittances growing by 5.7 percent to $9.4 billion at the end of May this year.
According to Wells Fargo, America’s largest lender, about three million Filipinos currently live in the United States, with most of them sending money regularly to families in the Philippines. Wells Fargo has remittance service partnerships with several of the Philippines’ largest banks.
The US is the largest source of remittances to the Philippines, data from the BSP showed. Not all this cash comes from US-based Filipino migrants. Money sent home by migrants in the Middle East or Asia through American financial institutions are counted by local authorities as remittances from the US.
Over the past year, some of the US’ biggest banks have scrapped remittance services to emerging markets. Among these banks are JPMorgan Chase, Bank of America and Citigroup. This follows a recent crackdown by American regulators on the flow of remittances from the US, which has forced banks to spend more on surveillance.
The World Bank estimates that $51 billion in remittances are sent to emerging markets from the US every year. The Philippines is the third-largest recipient of these money transfers, next only to C hina and India.
“The remittance business, especially the leg through the United States, now constitutes a volume that is not insignificant,” Tetangco said. “There is therefore a business case for this type of money flows and, as such, an incentive to find viable solutions for Philippine banks, should their US counterparts in fact abandon the businesses.”