Restrictions from large banks puts global money transfers at risk, says World Bank

Western Union money transfer. The World Bank has said unnamed large global banks are restricting or terminating their relationships with other financial institutions putting at risk money transfer services. PHOTO | SALATON NJAU | NATION MEDIA GROUP 

In Summary

• The surveys indicate that business lines such as clearing of cheques and trade finance are also affected by the move, according to a statement from the bank.
• Termination or contraction of these services can result into financial exclusion and negatively impact of countries that depend on foreign remittance inflows to boost their growth.
• Money sent home by Kenyans living abroad decreased to Sh13.09 billion in September from Sh13.47 billion in August due to lower remittances from North America.

By IMMACULATE KARAMBU
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Two surveys carried out by the World Bank between April and October 2015 show that unnamed large global banks are restricting or terminating their relationships with other financial institutions putting at risk money transfer services.

The surveys indicate that business lines such as clearing of cheques and trade finance are also affected by the move, according to a statement from the bank.

According to the World Bank, these restrictions are largely driven by commercial decisions as well as legitimate concerns about money laundering and terrorism financing risks, leaving customers to turn to unregulated financial institutions.

“Now that we have evidence that large banks are reducing services to correspondent banks and remittance providers, the private and public sectors need to come together to find practical and fact-based solutions.

“There is a real risk that turning away customers could actually reduce transparency in the system by forcing transactions through unregulated channels,” said Gloria Grandolini, senior director of finance and markets global practice at the World Bank Group.

Correspondent banking relationships aid companies and individuals to do business and make payments internationally.

Termination or contraction of these services can result into financial exclusion and negatively impact of countries that depend on foreign remittance inflows to boost their growth.

“Making banking services accessible, transparent and affordable is essential to achieving the goals of promoting financial integrity and universal financial access by 2020, which means that basic legitimate access to the formal financial system should be possible for everyone,” said Ms Grandolini.

Data from the Central Bank of Kenya shows that the amount of money sent home by Kenyans living abroad decreased to Sh13.09 billion in September from Sh13.47 billion in August due to lower remittances from North America.