Local authorities are working to mitigate the impact of the global crackdown on money transfer centers, which the Bangko Sentral ng Pilipinas (BSP) said might push Filipinos overseas to tap informal channels instead.
In a speech during the Bank of the Philippine Islands Foundation’s Financial Inclusion Summit 2016, BSP Governor Amando M. Tetangco Jr. admitted that the money laundering scandal that involved the entry of $81 million stolen from Bangladesh’s central bank into the country’s financial system and casinos was a hiccup in efforts to address the concern.
Tetangco said that while remittances from overseas Filipinos workers (OFWs) remained robust, there remained some concerns that needed to be addressed, “foremost of which is the adverse impact on remittance costs and flows of the closure of accounts of several money transfer operators by correspondent banks who are limiting their exposure to possible channels for money laundering and other financial crimes.”
A World Bank report this month cited BSP data showing that in the last two years, 84 accounts of 32 Philippine remittance providers—including banks and money transfer operators—were closed by 33 foreign banks in 13 major remittance-sending countries in compliance with regulations concerning anti-money laundering as well as countering terrorism financing.
“This is a de-risking strategy largely driven by business decisions of foreign banks, weighing the risks and benefits of dealing with remittance companies. This has been going on in recent years and has not been helped by the present money laundering case here,” Tetangco said.
The BSP chief warned that if this problem could not be immediately addressed, the costs to OFWs of sending money back home might rise.
“Since the closures limit the players that can competitively operate in the remittance market, this has the potential to reverse the steady gains we have made in reducing remittance costs. De-risking may also result in movement by (OFWs) toward informal remittance channels and subsequent financial exclusion. In the end, this may exact an even larger toll on the (OFWs) and their families in terms of deprivation of access to safe and reliable financial services,” Tetangco said.
According to Tetangco, the BSP has long been moving to address this problem. “As early as 2014, we have started raising our concerns on the adverse impact of de-risking with relevant international institutions. These include the Financial Action Task Force, Alliance for Financial Inclusion, the Global Partnership for Financial Inclusion of the G20, the US Department of Treasury, the Financial Stability Board, and the World Bank.”