Banks crack down on money transfer services

The worldwide trend for banks to shut up shop on international money transfer services has reached New Zealand.

The businesses, also known as money remitters, charge a fee to customers who want to send money abroad.

They are often used by Pacific Islanders in New Zealand to send money to relatives in the islands, including Samoa, Tonga and Fiji.

The Reserve Bank today warned banks not to make sweeping decisions to refuse accounts and services to money transfer services in a bid to comply with anti-money laundering laws.

"Money remitters play an important role in providing a specialised financial service that many people wouldn't otherwise access conveniently and affordably," it said.

"Remittances from New Zealand represent a significant part of many Pacific nations' incomes."

The bank said some money transfer services had recently experienced difficulty maintaining access to banking services or had completely lost access to banking services.

"Some of them believe that banks are indiscriminately terminating their bank accounts or refusing to open accounts for any new customers in the money remittance business," it said 

In some cases, the explanation banks gave for terminating accounts referred to the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, which can impose severe financial penalties against banks that fail to take reasonable steps to prevent money laundering or the funding of terrorist groups.

But the Reserve Bank warned banks that a "broad-brush approach", closing existing accounts or refusing to open new accounts for an entire category of customers, such as money remitters, was not the way to comply with the anti-money laundering laws.

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While there was no obligation on a bank to open an account, the Reserve Bank urged banks to do due diligence on money remitters to enable their services to continue.

"The recent New Zealand experience reflects an international banking trend known as 'derisking'," it said, but added: "Money remitters present varying degrees of risk. The Reserve Bank considers that banks' obligations under the act require measured risk management and do not justify blanket derisking."

The closure of money remitters' accounts was an international and domestic issue caused by a complex set of circumstances, the bank said.

It was unable to provide figures on the scale of the problem.

New Zealand Bankers' Association chief executive Kirk Hope said: "Banks take their obligations under the act very seriously.

"We're aware that one of the consequences of banks implementing the law is that some customers providing money remittance services have had their accounts closed.

"Money remittance services to some countries may not comply with the anti-money laundering law. This remittance issue has been identified in several anti-money laundering compliant countries." 


■ Money remitting services provide a alternative to banks for sending money to family and friends overseas. The services are a mainstay of many poorer or island economies

■Remittance services can charge lower fees than bank, and can be faster, though the exchange rates offered can be higher than the banks.

■Many money remittance services allow people to send money using the internet, customers often use remittance service agents in dairies. The sender takes in cash, or uses their debit card to make the remittance.

■Money remitters will either send money to a person's bank account, or they will send it to an agent for the recipient to collect.

 - Stuff

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