The Government Accountability Office (GAO) recently offered recommendations to the Treasury Department regarding derisking remittances in fragile countries.
Derisking is the practice of banks restricting services to customers to, in part, avoid perceived regulatory concerns about facilitating criminal activity.
Officials said while some from poor countries sending money from the United States consider the remittances as a lifeline, those transactions, and other global payments can be also be used to hide money laundering and other financial crimes.
The GAO said in the wake of some banks seeking to limit their exposure to the risk of financial crimes by refusing or restricting transfer companies’ accounts, transfer companies are bypassing the bank by taking cash over borders.
The GAO is recommending the Treasury assess the risks of the transfers, which are harder to monitor for criminal activity.
Each of the 12 money transmitters GAO interviewed, which served Haiti, Liberia, Nepal, and particularly Somalia, reported losing some banking relationships during the last 10 years – resulting in nine of the 12 money transmitters reporting use of channels outside the banking system, such as cash couriers, to move funds domestically or, in the case of Somalia, for cross-border transfer of remittances.
The GAO recommends the Treasury assess the extent to which shifts in remittance flows to non-banking channels for fragile countries, which could impact the Treasury’s ability to monitor for financial crimes and, if necessary, identify corrective actions.