Remittance flows to the developing world are expected to total $406 billion this year, says the World Bank, but the promise of mobile remittances has yet to be fulfilled.
Clearly there is enormous scope for mobile remittances, but with the opportunity comes risk. My belief is that central banks can best ensure this market is developed securely by having all such payments made through a central clearing structure, where real
time fraud analysis takes place. This is also a good point to control the FX rate margin and all fees, to avoid rip-offs.
It is important that these payments be subject to full anti-money laundering and anti-terrorist financing checks as a sine qua non. But the interests of the sender country do not stop there. Just like EU governments are looking askance at the business structures
of the Googles and Starbucks of this world and why they pay little tax, so is it also legitimate for these same sender countries to examine Remittance payments and determine that the right amount of income tax and social contributions have been deducted at
source, before the remitting individual is allowed to send money out of the country.
US$406 billion compares, for example, to the UK's public sector borrowing of £120 billion. Remitting individuals rarely bring capital in with them, and yet they are entitled to access to public services, and their ability to earn at all is predicated on
the existence of a public infrastructure to which they have made no contribution.
It is grossly unfair to resident taxpayers whose money stays in the country (often to be taxed over and over again) if remitting individuals are permitted to send money away without adequate checks that they have made their obligatory contribution to the
public services and infrastructure of the country in which the remittance has been earned.
Solution: the EU should introduce exchange control for payments that are leg-out, whilst abolishing central bank reporting for all leg-in ones. A remitting individual should produce an employer's payslip at the bank to show they have had the statutory deductions
Basic £85-110K dependent on experience OTE circa £...London
© Finextra Research 2015