When there are only a few ways to send money between two points, it becomes expensive. How will migrant workers respond? They will move to alternate channels such as hawala. Using the alternative of Hawala feeds the money laundering system. And that is the exact opposite of what Anti Money Laundering efforts are about.
An immigrant from Asia or Africa working in USA or Europe should be encouraged to use the banking system to send money home.
Specifically, let us say BankAm wants to become a correspondent bank for a bank in, let us say Pakistan, BankAm has to be sure that the Pakistani bank has good client onboarding practices that are FATF compliant.
It is easier for BankAm to hold back on such business than run foul of regulators. That is the trend spotted first in 2016 (click here) and now reaffirmed in the release on May 27, 2019 (click here) by the Committee on Payments and Market Infrastructure of the BIS.
This decline is an outcome of consolidating into reliable names the world over. The report has excellent information on payment corridors. These corridors are linkages between “where remittances originate” to “Where remittances terminate”. It is an interesting read indeed.
The Financial Stability Board had resolved to do something about this as financial inclusion is a clear and laudable goal. Its approach is documented here. Its latest report on progress in this direction was released on May 29, 2019 and can be viewed here.
But the numbers tell their own tale as banks are bound to err on the side of caution.