Making Remittances Work by Emiko Todoroki; Wameek Noor; Kuntay Celik; Anoma Kulathunga

Author:Emiko Todoroki; Wameek Noor; Kuntay Celik; Anoma Kulathunga
Language: eng
Format: epub
Publisher: The World Bank

Business model

More flexibility with respect to scale, organization, structure, and business model

More rigorous rules and less flexibility with respect to scale, organization, structure, and business model

Source: Authors’ compilation based on the survey.

Note: AML/CFT = anti-money laundering/combating the financing of terrorism; MTB = money transfer business.

Survey Findings: Registration vs. Licensing Regimes of Principal MTBs

The survey of Bilateral Remittance Corridor Analysis (BRCA) countries revealed interesting results. As required by the international standards on AML/CFT, all the sampled countries that allow MTBs to operate require them to be either licensed or registered. The survey revealed that most countries (both sending and receiving) prefer a licensing regime for principal MTBs rather than a registration regime (see figures 4.1 and 4.2). Six sending countries and 12 receiving countries have a licensing regime for MTBs. One sending and two receiving countries have a registration regime. Although officially it is a registration regime, in reality, authorities in those countries with a registration regime tend to require more than simple registration, making it closer to the licensing regime (see section “Preconditions for Licensing or Registration” on preconditions for entering the remittance markets).

Two sending countries (the United Kingdom and the United States) have a dual system in which there is more than one authority in charge of the licensing or registration of MTBs. In the United Kingdom, a license (or registration if a small MTB) is required from the Financial Services Authority (FSA), as the supervisory authority for payment service providers in the UK, and registration is required with HM Revenue and Customs (HMRC), under the Money Laundering Regulation 2007.2 In the United States, registration is required with the Financial Crimes Enforcement Network (FinCEN), which is the Financial Intelligence Unit in the United States at the federal level, and states often have their own licensing regimes. Requirements differ among states, and some states have no requirements except the federal ones.

Prior to the introduction of the EU Payment Services Directive, which came into force in November 2009, many EU countries had only a registration regime. The EU Directive strengthened the authorization of market entrants and essentially required member states to introduce a licensing regime.

Table 4.2 presents the number of licensed or registered MTBs in surveyed countries during 2010–11, when the data were provided. The survey findings support the earlier argument that a registration regime is easier and, hence, attracts a larger number of entrants to the markets. Canada, the United States, the United Kingdom, and Mexico are the countries with registration regimes, and the number of principal MTBs is much higher than the number of principal MTBs in the countries with licensing regimes. An exception is Guatemala, which also has a registration regime, but the number of entities is much lower. In contrast, in Afghanistan, there are 320 money service provider (MSP) headquarters and 313 branches of these MSPs licensed under the licensing regime. While there are some exceptions, it can be concluded that a registration regime means more players in the market.

Table 4.2 Number of Licensed or Registered Principal

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