Put simply, “global remittance” is the term used to describe the act of an immigrant worker transferring money to his or her home country. This practice has been around for a long time, but has recently been a cause for concern as to whether remittance companies are being used for money laundering and financing terrorist organizations. This has led to increased fees for those who utilize remittance services.
A good number of immigrants send money across borders and fee increases could lead to devastating effects. The World Bank estimates that people will be sending a total of “$436 billion in remittances to developing countries.” Furthermore, it estimates that the number will climb to $681 billion in 2016.
Even with this expected boom in business, news outlets are reporting that a number of big banks in the U.S. will be discontinuing their remittance services. Some think this doing that will help “crack down on the financing of terrorists and drug traffickers.”
It is assumed that Mexico will be affected more than other countries. According to The New York Times, “nearly half of the $51.1 billion in remittances sent from the United States in 2012 ended up in that country.” However, pain will also be felt in Latin America and parts of Africa. But, are banks held responsible for all fraudulent activity? Well, it seems that banks are “being held accountable not only for the customers who directly use their money transfer services but also for their role in collecting remittances from money transmitting companies and wiring them abroad.”
But, honestly, are drug dealers and terrorists frequently using big banks for their criminal activity? Does not seem very likely. Nonetheless, regulators are telling us that “the banking system was being exploited.” And although they have not begun prohibiting banks from doing what is deemed to be “higher-risk business,” banks will need to start spending more money to monitor these practices if they want to avoid significant penalties.
This leads to banks being forced into a type of law enforcement role and subsequently discourage the public policy goal of helping immigrants become familiar with mainstream banking.
Those who continue to utilize remittance services have found that the associated fees can become quite substantial. For Manuel Santiago, that is definitely the case. In his New York Times article, writer Michael Corkery reports that Santiago is 48 and living in Queens, NY. He sends money to his son and daughter living in Mexico and sometimes will pay as much as $4 to send them $20. While sending small amounts is not ideal, he admits that sometimes things will “come up irregularly” and he needs to get them the money.
A report published by World Bank shows that remittance costs had actually been falling over the last five years. However, that is no longer the case. And with banks moving away from remittance services, other providers are picking up their lost business. This includes companies like Western Union. As there become fewer and fewer providers for remittance services, those left will likely be able to charge higher prices. That could make the already expensive service even more costly.
What about here in Arizona? Have you noticed any increases in remittance services?