Closure of Bank Accounts of Remittance Service Providers - Global Challenges and Community Perspectives in Australia

Abstract

Since 2014, the policy focus on large-scale bank account closures of remittance service providers – generally called ‘de-risking’ – intensified internationally as well as in Australia. While the dilemma of these providers is the result of a complex combination of factors, money laundering and terrorist financing risks feature prominently. Money laundering and terrorist financing laws shifted national security-related financial risk control (including the costs of the risk control measures) to banks, lessening the commercial viability of relationships with small, higher risk customers. Legal rules, furthermore, allow banks to choose who may access their services, including accessing the national payment system via banks, and to terminate their contractual relationships with a customer, as long as they give proper notice.

In view of growing evidence of large-scale account closures globally, international standard-setting bodies and national regulators issued statements calling on banks not to engage in such account closures. No compelling evidence has yet emerged that these calls have stemmed the de-risking tide. While an increasing number of publications focus on the nature and extent of these closures, and their impact on remittance service providers, this article considers the policy and legal challenges in view of perspectives of migrant communities who rely on independent community-based remittance providers. It reflects the voices of members of primarily Horn of Africa migrant communities in Melbourne collected during a pilot study of the community views of de-risking closures. It finds that the lack of community engagement by regulators and banks may foster increased social exclusion of members of affected migrant communities.

The article argues for active engagement of the affected communities to understand the risks relating to these account closures and to find appropriate solutions, including legal solutions, to protect the significant individual, community, and public interests at stake. Such solutions include (i) recognising a right to a payment account, (ii) increased public-private partnerships between regulators and banks, including in relation to utilities, to enable them to manage integrity risks relating to remittance providers effectively and efficiently, and (iii) improved risk-based regulation and supervision of remittance service providers.

Keywords: De-Risking; FATF; Financial Inclusion; Remittances; Migrants