Changes in the Atmosphere? Increase of Remittances, Price Decline and New Challenges

This paper states that migrant remittances make crucial contributions to subsistence and economic growth in many countries. It highlights some of the challenges posed to money senders and immigrant communities. Issues important in this context are:

• Current effects of the regulations imposed by the U.S. Patriot Act of 2001;
• Effect of the entry of banks into the remittance business.

Based on the information gathered, the study indicates that legal and regulatory requirements have stiffened since September 11, adversely affecting the interests of money transfer enterprises in two ways:

• Banks have closed accounts held by money transmitters arguing that such businesses are inadequately equipped to control money laundering;
• Law enforcement and regulatory officials regard money transfer agencies as potential conduits for terrorist activities.

To understand the impact of the new players into the remittance market, the paper analyzes data on prices and an exchange rate provided by over 100 money transfer institutions, and compares it with data collected in November 2001. The cost of sending remittances continues to decline, partly due to competition and new technologies, though it still needs to be more affordable.

The paper finds that there are other challenging issues that need to be addressed, particularly:

• Effects of new regulations on the industry and on consumers;
• Long-term impact of the entrance of banks remains uncertain.