Protecting the West, Excluding the Rest: The Impact of the AML/CTF Regime on Financial Inclusion in the Pacific, and Potential Responses

Abstract

Financial inclusion is an important international policy goal. Remittances promote financial inclusion by contributing almost half a trillion dollars to the economies of developing countries each year and by giving people a strong reason to engage with formal financial services. In the Pacific, remittances represent a significant proportion of many countries’ GDPs. The G20 has committed to reducing the global average cost of sending remittances to 5%. At the same time, financial service providers are facing increasingly onerous regulatory requirements to combat the global rise in money laundering and terrorism financing. In Australia, these requirements have led to the bank account closures of many money transfer operators, posing a real risk to financial inclusion, growth and stability in the Pacific. This paper examines the G20’s goals for financial inclusion, the role of remittances in achieving these goals for the Pacific region, and the impact of AML/CTF regulations on the Australian remittance industry. A number of solutions are proposed to address the challenges facing the remittance industry in Australia.