SYDNEY, Nov 16 (Reuters) - The exit of major banks from Australia’s A$50 billion ($35 billion) remittance sector is increasing costs and risks forcing more money “into the shadows”, a local remittance industry body said on Monday.
The Australian Remittance and Currency Providers Association (ARCPA) disputed a regulatory report also released Monday that found no significant impact on the flow of international funds.
Banks globally have been exiting a number of businesses to avoid potential reputational damage or hefty regulatory fines if found to be involved in money laundering or terrorism financing.
Australia’s four major banks have been closing the accounts of many smaller money remittance service firms since 2010, citing rising compliance risks. Westpac Banking Corp became the last of the four to pull out of the sector earlier this year in what the industry calls “de-banking”.
AUSTRAC, Australia’s anti-money laundering regulator, said at least 719 accounts belonging to remittance businesses were closed by banks in Australia between January 2014 and April 2015.
And while there had not been a significant change in the overall volume or value of funds transferred into and out of Australia, the exit of the major banks has added to business costs for remitters, increased the complexities of doing business and created an uncertain operating environment, AUSTRAC added.
However, ARCPA said the AUSTRAC findings were heavily skewed to the big remitters and failed to find long-term solutions to the problem.
“ARCPA has seen that businesses have resorted to extreme measures, including taking physical cash across the border in order to facilitate their banking,” the industry body said in a statement to Reuters.
“The report does not discuss how de-banking will lead to transactions going to unregistered and unregulated entities, creating a bigger share of the underground, black market.”
The de-banking trend risks undermining a plan by the Group of 20 leading economies to cut the cost of remittances to around 5 percent of the value of each transaction, down from the current 8 percent estimated by the World Bank. The remittance firms argue that without access to the global banking system, the costs of transferring money become substantially higher.
Australia is among the top remitters in the world, sending more money to developing countries than any European country, according to the International Fund for Agricultural Development, a U.N. agency. (Reporting by Swati Pandey; Editing by Sam Holmes)