This document summarizes a presentation given by Emiko Todoroki of the World Bank on key regulatory issues for money transfers to Africa. Todoroki discusses the need to regulate remittance transfers and money transfer operators (MTOs) to address money laundering risks while promoting financial inclusion. She outlines challenges including large informal flows, non-bank players using new technologies, and varying levels of compliance with FATF standards across African countries. The presentation provides lessons learned from regulating alternative remittance systems and recommendations for policymakers, regulators, supervisors, and the private sector to develop regulations in a risk-based approach.

1. Global Forum on Remittances 2009 Tunis, Tunisia October 22-23, 2009 Key Regulatory Issues for Money Transfers to Africa Emiko Todoroki Senior Financial Sector Specialist Financial Market Integrity World Bank

2. Why do we need to regulate remittance transfers/RSPs? AML International Standards Public Policy Objectives

4. Difficulty for efficient, low-cost oversight

5. Non-bank players, use of payment gateway and technologies result in conflicting role among regulatory agenciesAuthorities Addressing the Integrity Concern

6. Designing the Regulatory Framework shift from informal flows to formal flows Remove unnecessary barriers to regulation

7. Characteristics of Operating Environment in Africa

8. Service Providers: Only banks (8 out of 50 surveyed countries in Africa) Only banks and exchange bureaus (32 out of 50 surveyed countries in Africa) Services/Products Mobile phone remittances (spreading fast) Other products such as stored value cards Sources: IFAD, Sending Money Home to Africa, 2009; World Bank (FPDFI), Bilateral Remittance Corridor Analyses and AML/CFT Assessment of countries Limited RSPs or Products allowed in the remittance markets in Afirca

9. The FATF Special Recommendation VI The objective of SRVI is to increase the transparency of payment flows by ensuring that jurisdictions impose consistent AML/CFT measures on all forms of money/value transfer systems. Licensing orRegistration Money/value transmissionservices are subjectto applicable Rec, in particular Rec4-11, 13-15, & 21-23 and 9 SRs Sanctions on money/value transfer serviceswithout a license or registration

10. Developed v.s. Developing Economies

11. Varying levels of compliance with SR VI among Regions Largely- compliant Partly- compliant Non- compliant

12. SR VI: Money/value transfer services and SR VII: Wire transfer rules Common Problems With SR VI & VII among developed and developing countries:

13. Registration or licensing?

14. Selected countries’ approach to licensing/registration

15. Lessons learned from regulating Alternative Remittance Systems (ARS)

16. Lessons learned from regulating ARS (Cont’d)

18. AML/CFT should not hamper the development of m-FS. Regulation should be targeted at creating a safe and sound market to promote financial inclusion.

19. All m-FS providers should be subject to AML regulations in accordance with risk-based approach (i.e. Conduct risk assessment prior to legislating controls).

20. Sector Regulators

21. Set clear licensing criteria and monitoring procedures that are commensurate with services and risks.

22. Define transaction limits giving each m-FS providers flexibility to take advantage of market opportunities.

23. Supervisors

24. Include the associated risks into the scope of their on and off-site duties

25. Private Sector

26. Consult with regulators on the development of new services

27. Introduce robust internal controls and risk management practicesMobile Financial Services: Policy Recommendations

29. Ms. Emiko TodorokiSenior Financial Sector SpecialistFinancial Market IntegrityThe World BankEmail: etodoroki@worldbank.orgTelephone: (202) 458-9466Fax: (202) 522-2433 For more information, please visit www.worldbank.org/remittancesandintegrity