Remittances in ACP Countries: Key Challenges and Ways ForwardInforming Discussions of the ACP-EU Dialogue on Migration and Development

improve irregular migrants’access to formal remittance channels

Recent estimates by the International Organization for Migration suggest that there are at least 50 million irregular migrants in the world. ! This is over one fifth of all international migrants.

Remittances – money migrants send home – provide a lifeline for some of the world’s most vulnerable and low income households by contributing to basic needs such as food, health care, education and housing. However, many irregular migrants are automatically excluded from accessing formal remittance channels, due to not having formal identification (documents) needed for opening a bank account in their

host countries, or for meeting Know Your Customer (KYC)* requirements needed to initiate a cross-border payment. For many migrants from ACP countries, the lack of means of identification is one of the primary barriers to access formal remittance services in certain corridors.

This, in turn, contributes to the prevalence of informal remittance flows, i.e. all money and in-kind transfers that do not involve formal contracts. Funds flowing through informal channels are not subject to customer protection measures, which leaves clients with no formal protection of their funds. This is particularly a problem in case of

undocumented migrants, who have few or no official resources in case they are victimized.

This Knowledge piece is drawn directly from the ACP-EU Migration Action publication “Remittances in ACP countries: Key Challenges and Ways Forward” and will explore potential approaches to improve irregular migrants’ access to formal remittances. !

* Know Your Custumor (KYC) is a set of due diligence measures undertaken by a financial institution to identify a customer and the motivations behind his or her financial activities. KYC is a key component of Anti-Money Launderuing and Counter-Financing of Terrorism regimes.

Background

“How to”

legal routes

for migration

identification

Adressing the challenge of identification by accepting some form of documents as support for using formal remittance channels, regardless of the immigration status of a potential remittance customer would have the largest impact on enabling the use of formal services to those who are forced to use informal channels for their remittances transfers. Whilst the proposal appears simple, it is acknowledged that achieving bilateral agreements with host countries on this matter can be extremely challenging.

KNOWLEDGE PIECE 2 | Remittances in ACP countries: Key Challenges and Ways Foward | ACP-EU Migration Action

Enabling legal routes for migration will be essential to support the flow of formal remittances. Actions to consider on this topic include:

• Raising awareness for migrants prior to their departure and provide information concerning their options for transferring money home;• Providing migrants with instructions on opening a bank account;• Raising awareness on the dangers of irregular migration.

informal to formal

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Encourage informal into formal and engage the informal sector. Actions to consider on this area include:

• Consider regulatory approaches to bring informal operators in the formal sector – provide options and incentives for licensing or registering. At the same time, countries should make sure that persons or legal entities carrying out remittance services illegally are subject to administrative, civil or criminal sanctions;• Strengthen and clarify rules in legal and judicial frameworks (for the prosecution of financial crimes);• Outreach to diaspora countries, providing information to migrants on the dangers of sending money informally – mainly through diplomatic missions.

Remittances in ACP Countries: Key Challenges and Ways ForwardInforming Discussions of the ACP-EU Dialogue on Migration and Development

resources and good Practices

IOM OIM

improving access to the remittance market by addressing the issue of identification: the example of mexico

iom: a rights-based approach to remittances **

EXAMPLE: The ‘Matrícula Consular de Alta Seguridad’ (MCAS) (Consular Identification Card) is an identification card issued by the Government of Mexico through its consulate offices to Mexican nationals residing outside of Mexico. The purpose of the card is to demonstrate that the bearer is a Mexican national living outside of Mexico and has no bearing on the immigration status in the foreign country that the migrant is residing in.

In 2001, the United States PATRIOT Act was passed and among its many items, it allowed financial institutions to accept the Mexican Matrícula Consular card, enabling financial institutions to serve unbanked immigrants who live and work in the United States. According to the Government of Mexico, an estimated 4 million Matrícula Consular cards were issued in the United States between 2001 and 2004. Immigrants could use the cards for opening bank accounts and access to account-to-account wire transfer services.

Without the regulation to assist in this area then a significant number of large sums would have been transferred informally.

acp-eu migration action: estimated flows of informal flows in acp countries

Matricula Consular read more here

ANALYSIS: We assessed for some ACP countries what the estimated size of the informal remittance sector is:

IOM and remittances read more here

the actions’ work on remittances

acp-eu migration action: highlighted technical assistance interventions and non-state actor initiatives

cariBBean:

africa:

Pacific:

Somalia - Mali - Kenya - Sierra Leone - Zimbabwe - Ethiopia - Cabo Verde - Togo - Ghana - IGAD - ECOWAS

OECS - Guyana

Tonga

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Ethiopia: “The volume of informal transfers is unknown, but potentially as large as the formal ones.”

Zimbabwe: “An estimated 50 % of remittances are circulating through private channels like money transfer agents or telecommunication systems. However, transporation agents (road and airline) and private/family networks are still handling informally an important part of the transfers, despite the higher risk of fraud migrants are exposed to.”

Sierra Leone: “Estimated 70% informal.”

Kenya: “Informal channels are a popular channel for remitting money, with 26% of the respondents choosing to remit money through friends, relatives or themselves.”

Read more on Ethiopia, Zimbabwe, Sierra Leone and Kenya

ETHIOPIA: The ACP-EU Migration Action provided the Ethiopian Ministry of Foreign Affairs with a study on how to improve formal remittances to Ethiopia. One of the key objectives was to identify the barriers adversily affecting Ethiopian Diaspora to use formal remittances.

The study highlighted that some Ethiopian Diaspora are forced to use informal remittances because they have no documentation that proves that they are legitimately in the country where they are residing. This is particularly relevant for Ethiopian diaspora communities in the Kingdom of Saudi Arabia and South Africa. In both of these countries it is against regulations to transfer funds on behalf of a customer that cannot produce documents, regardless of the value of the transaction.

IOM recognizes the positive contribution of remittances for sustainable development. Concurrently the Organization also recognizes that international migration is a complex, multi-dimensional reality, which requires coherent and comprehensive responses.

IOM is actively engaged in several remittance-related fields, including operations related to reducing the remittance costs and to improving access to remittance services as a part of financial inclusion. Furthermore, IOM searches to promote the wellbeing of migrant workers, their fair recruitment and fullparticiaption in society - including pre-departure orientation training, also covering financial literacy aspects. ** source: IOM position paper on remittances

Ethiopia read more here

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‘Remittances in ACP Countries: Key Challenges and Ways Forward’, builds on existing work in the area of remittances in order to identify challenges and reflect on ways forward in this field. Some resources and good practices, featuring also in the publication, are outlined below: