Report Urges Solution to ‘De-Risking’



Monday 25th September 2017 – A new report published in The University of Queensland Law Journal suggests a lack of government engagement across some remittance communities affected by ‘de-risking’ deepens feelings of exclusion that may feed radicalism – and urges stakeholders to come together to reach a solution.

The report titled: “Closure of Bank Accounts of Remittance Service Providers: Global Challenges and Community Perspectives in Australia” explores the state of the remittance industry and the communities affected from large-scale bank account closures of remittance service providers (generally called de-risking) from 2014.

Industry Chairman of APFII in New Zealand (Advancement of Pacific Financial Infrastructure and Inclusion) Robert Bell says this report takes an in-depth and balanced look into the issues faced by remittance closures by banks, and makes sound recommendations in terms of next steps.

“Remittance payments are relied on for financial survival all over the world. There is no easy solution, but all parties from remittance operators, to banks, government, community spokespeople and regulators need to come together to find a solution.”

The report notes that “Legal rules allow banks to choose who may access their services, including accessing the national payment system via banks, and to terminate their contractual relationships with a customer, as long as they give proper notice.”

The New Zealand Pasifika economy has close ties to Pacific island economies. Samoan remittances, at NZ$220 million, accounted for almost one-third of Pacific Remittances, and one-quarter of Samoa’s GDP in 2012/13 (Aiavao, 2014). A survey on financial inclusion in Samoa showed that 49% of the population do not have access to basic financial services.

The Pacific has been hit hard by “de-risking” – with one Central Bank governor calling it “financial terrorism on small island states” at an international forum, in 2015. Remittance companies in New Zealand have also found the impact of regulations challenging – with 80% of the locally owned providers closing down between 2014-2017, with little or no ability to respond to Banks concerns, despite support from the NZ Government, and the Reserve Bank of New Zealand.

“The problem with small communities is that if you are sending $200 it might be a cash transaction, there might be no invoice for it and it might be going to someone who doesn’t have a bank account. Consequently under the new tighter regulations, all those things look like crime, and has meant the unbanked people of the Pacific are unaffordable for banks to serve” says Robert Bell, APFII Chairman.

In 2015 a statement was released from the Reserve Bank of New Zealand that stated “The Reserve Bank considers that banks’ obligations under the AML/CFT Act require measured risk management and do not justify blanket de-risking. With appropriate systems and controls in place, banks should be able to manage and mitigate the money laundering and terrorism financing risks posed by many money remitters. If banks are de-risking to avoid rather than manage and mitigate those risks, then that would be inconsistent with the intended effect of the AML/CFT Act.”

In 2016 Bill English released a statement admitting ‘there are no “radical solutions” to keeping money remitters in business while banks want nothing to do with them.’

KlickEx spokesperson, Gretel Toleafoa, says the financial cost on New Zealand’s taxpayers will increase, as the escalating cost of sending money takes vital money out of the pockets of Pacific families, making their countries even more dependent on foreign aid.

“It is estimated that the KlickEx users who are predominately low-income families would each have over $937 worth of fees added on each year if our services were not offered. We have just over 100,000 clients here in the Pacific, and for many, that’s simply impossible. That represents nearly 20% of GDP per capita in these countries, and over the long term this issue will have direct financial consequences for New Zealand, as these communities get further left behind. 59% of New Zealand’s foreign aid goes to the Pacific, supporting development and good governance, in addition to what families send for basic needs,” says Gretel Toleafoa, KlickEx’s Head of Pacific Markets and Compliance.

The new industry group APFII (, and KlickEx ( support the new report and its recommendations to find an urgent solution with increased community engagement, and seek to see that the report’s full findings be considered for the New Zealand market. The report is due to be released to the public early next year.