The Impact of Big Four’s Decision on Developing Countries
Photo by Romeo Ranoco/Reuters
Following a leeway provided to a group of Sydney-based remittance companies that took on a class action in the Federal Court, Westpac Bank officially closed all bank accounts of remittance providers last March 31, 2015. Remitters who were not involved in the class action had their bank accounts closed earlier, on December 24. With the last of Australia’s ‘big four’ banks having closed their doors on remittance providers, thousands of migrants across Australia have lost their ability to send much-needed remittance back home.
Mitigating the Risks of ‘Terrorism Funding’ and ‘Money Laundering’
The decision of the banks to cut off remittance providers came in line with mitigating risks associated with money laundering and terrorism financing, stated Australian Banker’s Association. According to Australia’s banking lobby, increasing regulatory compliance costs made it challenging for banks to support remittance companies.” HSBC, BNP Paribas, and Standard Chartered are among the banks that have paid billions of dollars in fines for settlements of sanctions breaches and money laundering cases. This has led to many other banks viewing the risks of dealing with remitters “too high for them too bear.”
“We are continuing to work closely with the government, regulators and our customers to see what longer-term solutions may be possible to support and help make such payments in the future,” stated Westpac Bank.
The Impact of This Action to Filipinos in Australia
The closures of banks accounts will have great impact on Filipinos who have relatives in the Philippines who are dependent on remittances. In January 2015, Filipinos in Australia sent approximately US$ 55,079,000 worth of remittances to the Philippines. For some Filipino households, more than half of their budget comprises of remittances. AND for many Filipinos in Australia, the only way they can send money home is through the low-cost money transfer services provided by registered remittance companies.
Higher Remittance Fees
Faced with limited options, Filipinos will be forced to pay higher remittance fees. It is a well-known fact that banks charge more expensive fees for remittance services than registered remittance companies. “Most large banks continue to offer remittance services through online and account-to-account operations,’ stated Sonia Plaza from The World Bank Group. “However, the costs of sending remittances using these banks have increased. Their costs are far higher than the 5% target of the G20.”
“It also seems that Australian banks are using their market position when closing the bank accounts of MTOs to eliminate competition since these companies operate in the same remittance markets,” added Plaza.
Loss of Employment Opportunities
Many remittance companies, aside from ensuring that your hard-earned monies reach your loved ones at home, also provide employment to numerous Filipinos in Australia. The closures of their bank accounts have led many remittance providers to close their business. Many Filipinos run the risk of losing their jobs (if they haven’t already); and for future Pinoy migrants, many employment opportunities have been lost.
According to a paper jointly prepared by The World Bank Group, the Pacific Financial Technical Assistance Centre, the Pacific Islands Forum Secretariat, and the Pacific Financial Inclusion Programme, “the number of agents across the Pacific able to send and receive remittances from Australian money transfer providers has since decreased by some 50-60% from its former six thousand odd, and continues to decline.”