WASHINGTON—Despite a decline in remittance costs during the last decade, a new analysis indicates that costs are climbing again because of correspondent banking challenges.
The report from the International Monetary Fund (IMF) examines recent trends in outward migration from, and remittances to, Latin America and the Caribbean as well as their costs and benefits.
The authors say that the withdrawal of global banks from correspondent banking relationships has "disproportionately" affected money transfer operations, or MTOs, "given the enhanced challenges they face to meet the stringent know-your-customer anti-money laundering rules combating the financing of terrorism standards," reported The Gleaner.
The retreat by the global banks, widely referred to as de-risking, has been linked to their cost-benefit analysis in response to AML/CFT and tax transparency standards, said the paper, titled Migration and Remittances in Latin America and the Caribbean: Engines of Growth and Macroeconomic Stability? The Gleaner noted.
A survey carried out by the World Bank, referenced in the IMF paper, said "global banks have closed the correspondent bank accounts of MTOs, particularly smaller MTOs, on a widespread basis, curtailing their ability to transmit remittances,” The Gleaner reported.