Contents

1. Selected Regulatory Aspects for Remittance Service Providers, by Torsten Schlink (Bankakademie e.V.)

2. Contents • Money Laundering & Financing of Terrorism • Financial Action Task Force • EC’s “New Legal Framework for Payments in the Internal Market” • Impact on Remittance Market • Discussion

3. Money Laundering (ML) & Financing of Terrorism (FT) • Informal money remittance system have been existing for ages and they have provided efficient and effective money transfers • In certain circumstances they are even needed (e.g. Afghanistan) • However, since 9/11 especially informal Remittance Service Providers (RSP) are associated with money laundering and financing of terrorism • Thus, ML & FT regulations have been introduced and RSPs shall be licensed/registered

4. Financial Action Task Force (FATF) Special Recommendation VI • All banks and non-banks shall be subject to all FATF recommendations • Implement consistent anti-money laundering (AML) and counter-terrorist financing (CTF) measures on all forms of money/value transfer systems • enhance internal controls to cater specifically for AML/CFT risks • undertake customer due diligence procedures • introduce surveillance of suspicious transactions • keep transaction records • report suspicious transactions to national authorities. • Aims at either licensing or registration of informal remittance business • FATF allows governments’ discretion to exempt low-value transactions that fall below a certain threshold from AML/CFT requirements.

5. EC’s Directive on Payment Services in the Internal Market – Payment Institutions (1) • Directive aims at: • A modern and harmonized legal framework for payment services for the entire internal market • More competition in the field of payments • Increased transparency and legal certainty (in the single payment area) • Applies for payment service providers in the European Union • Covers all currencies, not only the Euro • Authorized payment institutions can expand their businesses to other Member States (“EU passport”)

6. EC’s Directive on Payment Services in the Internal Market – Payment Institutions (2) • Authorization is to be granted against submission of (among others) • Business plan • Administrative and accounting procedures • Internal control mechanisms (i.e. AML/CFT) • Risk management procedures • Information about the owner(s)/shareholders • Payment institutions shall be • Supervised by a competent authority (to be named by Member State) • listed in a register

7. Conclusion What will be the impact on the Remittance Market ? • EU – specific: • Market becomes more transparent – but only for the existing Remittance Service Providers (RSP) • Directive does not “invite” Informal Remittance Service Providers • EU aims at full traceability of all transfers, i.e. zero threshold for transfers • Transfers in Euro will become cheaper – but will require bank accounts in the sender and receiver country • In general: • Access to RSPs in receiving countries remains a challenge – outreach must be increased • Channeling remittances through the formal financial sector remains a challenge • Migrants without “proper” ID may remain excluded from formal RSPs • Transaction volume thresholds are welcomed but impact needs to be analyzed