Central Banks and Regulators are failing in their quest to get visibility of all remittance transactions – it needn’t be that way. July 12, 2018

Governments like things they can see and put their arms around. It helps them raise much needed tax revenues and creates more certainty around the different aspects of the economy that they regulate.
This is certainly the case for remittances where another dynamic is at play – being seen to keep on the right side of illegal money flows so that they keep in step with some of the western nations both politically and economically.

The challenge with remittances is that the regulator puts the onus on the Money Service Businesses (MSBs, such as Banks, Money Transfer Organisations (MTOs) etc.) to manage the compliance and report back to the Central Bank/Regulator. This relies on two key things that are not always there.

The first is the assumption that the MSB has an effective compliance technology in place. The reality is that not all do. The second assumption is that they are competent at reporting back to the regulator. The reality is that not all of them are.

So, effectively the regulator doesn’t know what it doesn’t know. It certainly doesn’t know what it can’t see!

Consider a hypothetical African nation. From an estimated $22bn annual flow of money into the country from individuals (i.e. remittance-like money flows), only $5bn or so is through official, regulated channels. The significant amount flowing through un-regulated channels could include transactions from or to people or organisations who are on the various blocklists. This ongoing situation neither helps this country economically, nor politically where they’d prefer to stay aligned with western allies.

Furthermore, there is clear evidence that getting payment transactions into the regulated world is not only better for governments, but is better for senders and recipients too, and provide valuable secure financial services for the population of millions that are unbanked in developing countries.

Shift the thinking

A better solution for Central Banks or Regulators is to take responsibility for the process of compliance themselves. If they were to accept that the remittance world is not going to provide them with the visibility they need, they need to find a way to do so themselves.

This is not a new or radical thought. Anyone who attends remittance conferences around the world will have had or heard such a discussion. But Central Banks and Regulators are generally unrepresented at these events. They should be there more often.

When it comes to a centrally implemented compliance process, fortunately, technology can help. The right compliance platform can be implemented by a regulator centrally that will fix the problem of under-reporting and weak compliance at MSB level.

A modern regulatory compliance system would be able to check remitter and beneficiary names against various global sanctions lists, possibly in real-time. This solution should flag up who is trying to bypass the system, for example by structuring or linked transactions. It should flag up any type or combination of suspicious transactions. In conducive circumstances, this could be done quick enough to allow for interventionist strategies, instead of responding to a report sometime after the event.

A central regulatory compliance solution can provide both volume and velocity checks on every transaction across every money transfer channel. Obviously, this amounts to millions of transactions per annum, so the reporting element of such a solution needs in itself to be strong to find the needles in the haystacks.

What about other banks?

The concept of a centralised but standalone compliance system could also apply to banks involved in the remittance chain. Commercial banks have to a lesser extent the same challenge as a central bank in that they often deal with multiple other MSBs in their remittance corridors. Commercial banks still need to ensure that they are on the right side of compliance, and they often rely on the same poor reporting system from MTOs that central banks do. Not only that, but they need to consolidate compliance reports from multiple MTOs in their markets.

A neater solution is for the commercial bank to implement their own compliance solution that connects real-time to the other MSBs in their remittance chain (usually MTOs) and removes their reliance on them.

Help is at hand

Naturally, as the global leader in remittance technology, RemitONE has a solution that addresses compliance for regulators, central banks, commercial banks and all types of MSBs. RemitONE ComONE can replace legacy applications, can co-exist with legacy systems and can connect seamlessly with other partners in the remittance chain.

It sits neatly in the middle of the remittance chain, provides full compliance functionality including volume and velocity checks, as well as real-time blocklist checks against the leading sanctions lists such as PEPS, the CIA (USA), the NCA (UK), wanted criminals and terrorist organisations.

RemitONE ComONE connects with all types of platforms in the remittance chain to become the trusted compliance component in any corridor for any volume of transactions.


Compliance is a complex area, often made worse by poor strategic direction from central banks and regulators. Both of these (as well as commercial banks in the remittance chain) could be doing much more to ‘own’ the compliance problem and identify non-compliant transactions. The technology is available to support them, if only they were to look a bit harder and think a bit differently.

It is in every legitimate organisation’s interest to bring more transactions into the regulated fold. It is certainly in the interest of the consumer – more transactions typically mean lower per transaction costs, more security and more service innovation that helps them support their loved ones from overseas.

In countries with a high volume and percentage of un-regulated transactions, a central bank or regulator could be taking the initiative and invest in technologies that meet their compliance and transaction transparency needs instead of relying on under invested MSBs to do the work for them. All the evidence shows that the current approach is not working well enough.

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