Illegal Money Transfer

REPORT
TACKLING THE $1 BILLION
ILLICIT MONEY TRANSFER
BUSINESS TO GHANA
AUGUST 2011
i
TABLE OF CONTENT
EXECUTIVE SUMMARY ............................................................................................................................ 1
CHAPTER ONE ......................................................................................................................................... 9
1.0
Remittances ............................................................................................................................ 9
1.1
The Case of Africa ................................................................................................................. 10
1.2
The Case of Ghana ................................................................................................................ 12
1.3
Macroeconomic Impacts of Remittances ............................................................................. 14
1.4
Ghana Regulatory Overview ................................................................................................. 17
1.4.1
Types of organisations that are able to offer remittances ........................................... 18
1.4.2
Foreign Exchange rates ................................................................................................. 20
1.4.3
Transfers outside of Ghana ........................................................................................... 21
1.4.4
Payment systems .......................................................................................................... 22
1.5
Money Laundering ................................................................................................................ 22
CHAPTER TWO ...................................................................................................................................... 25
2.1
DI Research ........................................................................................................................... 25
2.2
Objectives.............................................................................................................................. 26
2.3
Methodology......................................................................................................................... 26
2.3.1
Research Format (Interview Form) in UK...................................................................... 26
2.3.2
Research Format in Germany ....................................................................................... 27
2.3.3
Focus Groups................................................................................................................. 27
CHAPTER THREE .................................................................................................................................... 28
3.1
RESEARCH RESULTS (UNITED KINGDOM) ............................................................................. 28
3.2
Forms of Money Transfers Systems ...................................................................................... 30
3.2.1
Formal Money Transfer Operators ............................................................................... 30
3.2.2
Illegal Money Transfer .................................................................................................. 31
3.3
Operators .............................................................................................................................. 32
3.3.1
Money Transfer Options ............................................................................................... 33
3.4
How much is transferred ...................................................................................................... 35
3.5
Research Results Germany ................................................................................................... 39
3.5
Findings from Holland ........................................................................................................... 47
3.6
Interview with Money Transfer Operators (UNITY MONEY TRANSFER)............................... 48
3.7
Interview with Universal Money Transfer (GERMANY) ........................................................ 50
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3.7
Examples of Companies Involved In Illegal Money Transfer in the Netherlands ................. 51
3.8
A visit to an illegal Money Operator in Ghana ...................................................................... 52
CHAPTER FOUR ..................................................................................................................................... 54
4.0
Recommendations ................................................................................................................ 54
BIBLIOGRAPHY ...................................................................................................................................... 58
ii
LIST OF TABLES
Table 1 Private, Official and Total Unrequited Transfers ........................................................ 14
Table 2: Frequency with which money is remitted home (UK) ............................................... 28
Table 3: Money Transfer Commissions per up to £100.00...................................................... 35
Table 4: Total amount of money remitted by MTOs ............................................................... 36
iii
LIST OF FIGURES
Figure 1: Sources of Remittances to Africa and All Developing Regions in 2010 .................... 12
Figure 2: Source of remittances to Ghana through Banks (2007) ........................................... 14
Figure 3: Reasons for which money is remitted home (UK) .................................................... 30
Figure 4: Choice of Money Transfer Operators ....................................................................... 34
Figure 5: Gender of Respondents (Germany) .......................................................................... 39
Figure 6: Age grouping of respondents (Germany) ................................................................. 39
Figure 7: Frequency with which money is remitted (Germany) .............................................. 40
Figure 8: Money remitted to Ghana (Germany) ...................................................................... 41
Figure 9: Beneficiaries of remittances (Germany) ................................................................... 41
Figure 10: Duration it takes to remit money through preferred sending routes .................... 42
Figure 11: Preferred remittance route ................................................................................... 43
Figure 12: Reasons for choosing preferred remittance route (Germany)............................... 43
Figure 13: Length of time for recipients in Ghana to receive money (Germany) ................... 44
Figure 14: Knowledge of Money Transfer Operators in Germany .......................................... 45
Figure 15: Any Problems encountered during the process of remitting funds? ..................... 46
Figure 16: Employment status of respondents........................................................................ 46
Figure 17: Ideas from respondents to improve money transfer operations........................... 47
v
EXECUTIVE SUMMARY
The World Bank estimates that for 2010 alone, the total formal remittances worldwide by
some 215 million international migrants amounted to $440billion with $325 billion of this
amount going to developing countries. A transfer of funds is any transfer that the payer
(sender) makes through a Payment Service Provider (PSP) to make funds available for
collection at another PSP if at any stage in the process the money is moved electronically,
for example, by email or fax. When a PSP (or Money Transfer Operator) transfers funds the
rules stipulate that they must normally send information on the payer and payee
(recipient/receiver) with the transfer. This allows the authorities to trace payments if
necessary and for economic managers to be able to ascertain the impact of this important
area of financial activity on a nation’s economy.
Thus, from the records, some 31 million African migrants in 2010 remitted $40 billion,
representing 3.4% of the continent’s total GDP through such traceable transfer channels.
Since the earlier reforms of the 1980s and 1990s under the Financial Sector Adjustment
Programme (FINSAP), the 2001-2008 period brought in a series of significant financial
reforms, including the Foreign Exchange Act 2006, aimed principally at liberalising Ghana’s
financial sector and deepening and widening its impact on the nation’s economic activity. It
is noteworthy that between 1990 to 2000, recorded total private remittances to Ghana
increased 58.17%, from $410.5 million to $649.3 million. The next decade witnessed a
significant increase of 226.5%, with recorded private remittances (accruing to individuals)
through the financial sector increasing from $649.3 million in 2000 to $2,120 million in
2010.
One major challenge facing the Bank of Ghana is to do with tracking private remittances
from Ghanaians living abroad. Migrant remittances are sometimes confused with private
capital flows (and even aid flows). A global survey of central banks undertaken by the World
Bank in 2008-09 shows that Ghana’s central bank is not alone in struggling with this issue
1
and that central banks generally are finding it difficult to distinguish between migrant
remittances and other small-value transfers such as small investments, trade payments and
transfers by/to non-governmental organizations and embassies. The issue of improving
remittances data is high on the agenda of the Global Remittances Working Group (created
in 2009). An Action Plan was created in May 2010 to help countries helped by private
remittances improve their remittances data, including improving bilateral cooperation
between remittance source and recipient countries, creating a web-based interface for
sharing data and metadata, and using household surveys and surveys of migrants to
supplement remittances data traditionally collected from banks and money transfer
companies.
However, our research shows that, apart from the element of household surveys and
surveys of migrants, a country like Ghana will still struggle with data accuracy unless positive
steps are taking to tackle the growing activity in established illegal money transfer
operations. This is because the established phenomenon of unlicensed money transfer
operations will continue to underestimate and distort the actual size of foreign exchange
receipts and transfers to Ghana from Ghanaian emigrants, in particular.
In February 2010, the Monetary Policy Committee of the Bank of Ghana reported that
“Private remittances in 2009 amounted to US$1.57 billion, compared to US$1.68 billion in
2008.” This was later revised to $1.79 billion. The size of private remittances for 2010 was
put at $2.12 billion, representing an increase of 18.4% from the 2009 amount of $1.79
billion. This translates into 7% of Ghana’s expanded rebased GDP and 24.8% of total
exports, even more if measured by the fact that, Ghana does not receive more than 40% of
gold exports, in terms of actual foreign exchange receipts. Notably, the mining companies
own most of the gold exports and to the extent that they do repatriate most of these
earnings offshore to service debts, pay dividends and buy machinery, leveraging them to
finance international trading is difficult. Thus, in reality Ghana benefits more from
remittances than gold, in terms of actual foreign exchange receipts. Again, Foreign Direct
Investment to Ghana for 2010 amounted to $1.1billion, almost half of the figure of total
remittances to Ghana.
2
What may appear even more curious is the data for 2011. In July 2011, the Bank of Ghana
issued its Monetary Policy Report on World Economic Outlook and External Sector
Developments. This latest data shows that “Private inward remittances through the banks
from January to May 2011 increased to $7.1 billion, from $4.2 billion in the corresponding
period of 2010,” representing a 68% growth. Instructively, the BoG report manages to
suggest that $745.1 million (10.5%) of the $7.1 billion accrued to individuals in the first five
months of 2011. Clearly this area requires serious attention from both Government and
interested parties, including society, in seeing how its benefits to the nation can be
leveraged.
As already indicated, the data on African migration and remittance flows are likely to be
understated because of the scale of undocumented migration within the African continent,
the prevalence of illegal remittance channels on the continent, and the relatively weak
official data in many African countries (World Bank 2006). Similarly, the data on remittance
flows to Africa, particularly from Africans abroad, grossly understate the scale of
undocumented money transfer because of similar and additional problems. Very little
research has been done in this area even though the impact that this area of illegal money
transfer has on African economies are significant.
Our research, much of it relied on undercover investigations, shows that the central bank
and other investigative bodies in Ghana can do more to discover what is happening on the
illegal money transfer front. Typical of our work involved our investigators transferring
money from some of the established unlicensed money transfer operators abroad and
picking it up from their local outlet in Ghana. Thus, with a single transaction, one is able to
identify both a major source of unlicensed remittance and the receiving channel in the
country of destination.
Our research suggests that at least between 30% to 50% of total remittances are sent
through the illegal money transfer route, with such recorded private remittances at $2.12bn
in 2010, the actual amount remitted to Ghana (both recorded and unrecorded) may be as
high as $4bn at the end of this year. While some 30% of the Ghanaians abroad we
interviewed admitted to preferring sending money to Ghana through unlicensed channels,
3
we believe the numbers may be much higher in countries such as the Netherlands and
Germany, where the rules are too stringent for the African shops to operate as agents, as is
done in the United Kingdom. We also found that the amounts remitted through the
unlicensed channels are usually greater than what go through the registered channels,
where transactions are strictly monitored in the fight against money laundering.
The growing phenomenon of the underground money transfer business represents a huge
loss of direct revenue to the state (in unpaid taxes from profits made by these illegal MTOs)
and even more so the capacity of the state to leverage these large incomes of foreign
exchange in making critical purchases such as crude oil. It also distorts the true macroeconomic picture in addressing our balance of payment issues, enhancing our
creditworthiness and even using it as indirect collateral for raising funds from the
international money markets. We anticipate that if the current underground phenomenon is
not checked it could in ten years lead to the collapse of independent formal MTOs, many of
which are owned and run by Ghanaians.
This report contains findings and recommendations of a 3-month research undertaken by
the Danquah Institute on illegal money transfer operations. Our work focused on Ghana, the
payee’s country, and the three largest European remittance corridors (United Kingdom,
Germany and The Netherlands) to Ghana. The study looked at the Ghanaian regulatory
environment as well as that of the 3 other sender/payer nations, the products and services
available on the market and the remittance patterns. We interviewed money transfer
operators, regulatory authorities, senders and recipients, including exporters and importers.
We also spoke to law enforcement agencies regarding the aspect of money laundering.
Remittances go hand-in-hand with poverty reduction and will continue to be important
for Ghana’s development as it makes the transition to a Middle-Income Country.
Interviews with Payment Service Providers (PSPs) or money transfer operators (MTOs)
servicing the Ghanaian market and a survey of the Ghanaians in the UK, Germany and the
Netherlands were among the means by which this research was conducted. From this, a
number of findings as well as recommendations are made.
4
We found that despite the increasing numbers of licensed MTOs over the last two decades,
the volume of cash transferred through unlicensed channels have been growing in the past
few years. The global financial crisis has not only reduced the amount of money sent per
transaction, it has also made people pennywise, always looking for the best deals, a
situation that is being fully exploited by illegal money transfer operators. Beauty shops, food
stores, spare parts shops, kiosks, churches, social groups, homes, have become regular
channels for remitting cash to Ghana at ostensibly competitive rates. Some of the factors
that make them attractive to many Ghanaians living abroad include, no commissions
charged, no personal identification documents required, no limits to amounts transferred,
being able to pick up money in foreign currencies back in Ghana and the ability of the illegal
operators to quote an exchange rate even better than the daily rate provided by the Bank of
Ghana.
The United Kingdom is the biggest source of remittances to Ghana, second only to the
United States. The UK has the most liberal regime for international money transfer business
to Ghana. The MTOs are allowed to employ the services of agents, some of whom are
proprietors of shops, others simply equipped with payment forms and a mobile phone or
payment forms and a laptop with internet facility, In the UK, the threshold for a
payer/sender to be required to produce ID is £900. There is anxiety over moves to bring this
further down in the UK to £200. According to agents, reducing the threshold will be bad for
licensed MTOs businesses. The natural consequence of a lower threshold is that it will push
more and more people into using the illegal money transfer, exposing more and more
innocent people to the underground world of money laundering and its attendant
consequences. There are a lot of companies in the UK involved in the money transfer
business operating as Payment Service Provider, but are not registered under the FSA or
with the UK Money Transfer Association. Indeed there was a particular market within a
community of large Ghanaian and Nigerian population in South East London, where the
ground floor serve as agent to a registered MTO and another part of the same shop does its
own illegal money transfer business, offering cheaper terms. Even though the UK has a
more liberalised system that allows licensed MTOs to have agents, some of those agents
were themselves operating their own illegal money transfer business.
5
The countries most affected by unlicensed money transfers are the Netherlands and
Germany, where unlicensed shops and individuals operating from their homes have
overwhelmed the licensed MTOs. We estimate that as much as half of the amounts
transferred through the Netherlands and Germany are done through the unlicensed means.
We found that the current stricter regulatory regime (post-9-11) has, paradoxically, had the
undesired and undesirable effect of pushing more and more people into the black market of
unlicensed MTOs. Whilst the volumes of unlicensed money transfers in the UK are high
because of the sheer size of the migrant population, the presence of a more liberal
regulatory regime has ensured a lower percentage of transfers through unlicensed sources.
We found that the growing patronage of the unlicensed MTOs, if not checked may lead to
the collapse of otherwise vibrant licensed independent MTOs (some like Samba and Unity
Link owned by Ghanaians) within the next 10 years. Clamping down on the illegal operators,
while at the same time relaxing the rules to pull in more money senders into the formal
MTO sector will lead to a healthier and more competitive environment to serve the needs of
customers and national economies.
We found out that the growing influence of the West African corridor in the illicit drug trade
to Europe is having a huge impact on the operations of the unlicensed money transfer
channels. Indeed, in Germany, it was one such ‘Afro’ shop, which was a known unlicensed
MTO, servicing the Ghanaian community that was caught up in the single largest drug bust
in Germany for 15 years, with $37 million worth of marijuana hidden amongst seven tonnes
of pineapples in Hamburg harbour
in March 2009. Honest importers and exporters,
particularly those buying used goods abroad for the Ghanaian market, are forced by
inflexible regulatory regime and convenience of trade to patronise the illegal MTOs, through
which they can transfer as much as €200,000 at a time to facilitate their legitimate business.
These illegal money transfer operators have become a useful conduit for money launderers,
attracting unhelpful negative attention to small, honest, Ghanaian businesses in Europe. It
requires the joint operation of regulatory bodies both here in Ghana and the sender host
nations to bring sanity into this very important economic and social area.
Recent and prospective rules and regulations show that regulatory bodies in Europe are
being forced to target African-owned shops in their efforts to tackle money laundering for
6
drug traffickers and terrorists, beyond the simple task of clamping down on unlicensed
operators. While that may be counterproductive, very little, on the other hand, is being seen
to be done by the regulatory body here, the Bank of Ghana, to encourage a positive shift
from the patronage of illegal MTOs to the legal ones.
Our findings show that Accra and Kumasi have the largest concentration of unlicensed
receiving points for cash transferred through unlicensed channels in Europe. Due to the cost
involved in setting up collection points outside of the main cities, those living in rural Ghana,
who are sent money from abroad through the unregistered channels often end up spending
more to pick up the transferred funds, a cost that can, ironically, cancel out the cheaper
costs that the sender incurs from using such illegal MTOs. The Bank of Ghana, the regulatory
body in Ghana needs to deal with some urgency, this growing threat of unregistered foreign
exchange transactions to the nation’s balance of payment and related financial implications
to society and the economy. We hope that this report will assist them in their efforts
towards that end. Our analysis indicate that the risks involved in transferring money through
illegal operators for both sender (abroad)and receiver (in Ghana) outweigh many of the
benefits. We found stories of Ghanaians who transferred thousands of Euros only for the
recipients in Ghana to be given mobile phone numbers to call for collection that were
unreachable. There are stories of some people receiving counterfeit foreign currencies
through these unlicensed outlets in Ghana. While funds transferred through a registered
MTO can take five minutes to be picked up by the intended recipient, those through
unregistered channels can take between three hours and two weeks, depending on the
amount, location and reliability of the receiving agent.
Improvements in the remittance corridor can be made through increasing competition,
improving convenience, liberalising operations, clamping down heavily on unlicensed money
transfer operations, enhancing access and trust as well as expanding the range of products
and services available on the market for both sender and receiver. The benefits include
reducing the cost (thereby increasing remittance volumes into Ghana), incentivising illegal
remitters to use formal channels, improving Ghana’s balance of payments, improving
Ghana’s creditworthiness due to increase in registered foreign exchange transactions, as
7
well as more indirect effects such as increasing financial inclusion, improving financial
literacy and using remittances to finance specific areas of development.
In adopting a forward-looking approach, the analysis shows that there are a number of
significant weaknesses and challenges in both the European and Ghanaian markets that will
impede competiveness in the future and may eventually lead to the collapse of the
independent MTOs, if not addressed.
These will disadvantage the consumers of
remittances, the Government of Ghana and money transfer operators and, at the same
time, defeat the regulatory aims of sender nations.
There are a number of key areas that should be addressed in order to position the Ghanaian
remittances market efficaciously. These initiatives are broad-ranging and involve a number
of stakeholders in Europe and Ghana. We are calling on both Government and the Bank of
Ghana to make the money transfer business a two-way system in Ghana. This should allow
companies like Western Union to operate in Ghana the same way that they operate in many
other countries, where funds can either be received or sent from their outlets with ease and
speed. This will help Ghanaian businesses and individuals, including, for example, Ghanaians
who find themselves stranded abroad during a short stay there.
There should be greater co-operation between the BoG and its counterparts in the other
countries. There should be greater co-operations between our security agencies and their
foreign counterparts dedicated to anti-money laundering matters. But there should be more
focus on public education, especially through community radio stations both in Ghana and
the host nations of Ghanaian emigrants.
It is important that mechanisms are introduced to deal decisively with this multi-billion
dollar underground business, which has become institutionalised. Mechanisms can include
the establishment of a taskforce in Ghana dedicated to the twin issue of clamping down on
the illicit trade in international money transfers and making it easier and convenient for
MTOs to operate in Ghana, serving the Ghanaian customer better for the good of the
economy.
8
CHAPTER ONE
BACKGROUND
1.0
Remittances
Remittances are often said to be the most tangible and least controversial link between
migration and development. A transfer of funds is any transfer that the payer (sender)
makes through a Payment Service Provider (PSP) to make funds available for collection at
another PSP if at any stage in the process the money is moved electronically, for example,
by email or fax. When a PSP (or Money Transfer Operator) transfers funds they rules
stipulate that they must normally send information on the payer and payee
(recipient/receiver) with the transfer. This allows the authorities to trace payments if
necessary and for economic managers to be able to ascertain the impact of this important
area of financial activity on a nation’s economy.
According to the World Bank, there are 215 million international migrants (3 percent of the
world population) in the world. The World Bank also estimates that worldwide remittance
flows for 2010 exceeded $440 billion. From this amount, recorded remittances received by
developing countries are estimated to be US$325 billion, an increase of 6 percent from
2009.
The estimated $325 billion far exceeded the volume of official aid flows and
constitutes more than 10 percent of gross domestic product (GDP) in many developing
countries.
In 2010, the top recipient countries of recorded remittances were India, China, Mexico, the
Philippines and France. As a share of GDP however, smaller countries such as Tajikistan (35
percent), Tonga (28 percent), Lesotho (25 percent), Moldova (31 percent) and Nepal (23
percent) were the largest recipients in 2009.
High income countries are the main source of remittances. The United Stated is by far the
largest with $48 billion in recorded outflows in 2009, Saudi Arabia ranks as the second
largest, followed by Switzerland and Russia.
9
Remittance flows to developing countries proved to be resilient during the recent global
financial crisis – they fell only 5.5 percent in 2009 and registered a quick recovery in 2010.
1.1
The Case of Africa
Remittances sent by 31 million international African migrants reached $40 billion in 2010,
equivalent to 2.6 percent of Africa’s gross domestic product (GDP).
The data on African migration and remittance flows, however, are likely to be understated
because of the scale of undocumented migration within the African continent, the
prevalence of illegal remittance channels within the region, and the relatively weak official
data in many African countries (World Bank 2006).
The true size of remittance flows to Africa, including unrecorded flows through formal and
illegal channels, is believed to be significantly larger than the official data. After foreign
direct investment (FDI), recorded remittances are the African continent’s largest source of
foreign inflows even larger than FDI in some instances. Remittance receipts generate large
benefits for the countries of origin in Africa.
Migrant remittances have become an important source of external finance for the African
continent. Officially recorded remittance flows to Africa, are estimated to have increased
from$9.1 billion in 1990 to nearly $40 billion in 2010, a percentage increase of 340%
(divided roughly equally between North Africa and Sub-Saharan Africa).
A few countries account for a substantial share of remittances to Sub-Saharan Africa and
North Africa. Nigeria’s $10 billion equalled about half of all officially recorded remittances to
Sub-Saharan Africa in 2010.
Other large remittance recipients in Sub-Saharan Africa, in order of importance, include
Sudan, Kenya, Senegal, South Africa, and Uganda.
As a share of GDP, however, the largest recipients are Lesotho (28.5 percent), Togo (10.7
percent), Cape Verde (9.4 percent), Senegal (9.3 percent), The Gambia (8.2 percent) and
Ghana, which has seen the size reduced to about 7% of GDP since the size of the economy
10
was nearly doubled after rebasing. Before rebasing, Ghana was about the second largest
recipient of private remittances as a percentage share of GDP. In North Africa, the Arab
Republic of Egypt and Morocco—the two largest recipients in North Africa in terms of both
U.S. dollar–denominated flows and share of GDP—account for three-quarters of flows to
North Africa region, followed by Algeria and Tunisia.
Estimates based on bilateral migration stocks, incomes in destination countries, and
incomes in countries of origin indicate that the top sources of remittances for Sub-Saharan
Africa, as shown in figure 1.1, are the European Union (EU)-15 countries (41 percent of
inflows) and the United States (28 percent) (Ratha and Shaw 2007;World Bank 2011).
The remaining sources are other developing countries, primarily in Africa (13 percent); the
Gulf Cooperation Council (GCC) countries (9 percent), and other high-income countries (8
percent). North African countries are even more dependent on remittances from Western
Europe (54 percent) and the GCC countries (27 percent).
11
Figure 1: Sources of Remittances to Africa and All Developing Regions in 2010
120%
100%
80%
3%
10%
3%
4%
7%
9%
1%
8%
9%
20%
27%
Within Africa
18%
60%
Other high income countries
GCC
41%
19%
40%
Western Europe
United States
54%
20%
33%
28%
5%
0%
Sub-Saharan Africa
1.2
Other developing countries
North Africa
All developing regions
The Case of Ghana
Studies analyzing the impact of remittances show that these flows are beneficial at all
levels—individual, household, community, and national. This trend is no different in Ghana,
where migrant remittances increased from about $449 million in 1999 to $1.79 billion in
2009, far exceeding Official Development Assistance (Bank of Ghana 2008).
The Bank of Ghana Monetary Policy report on World Economic Outlook and External
Sector Developments of July 2011 (Vol. 4: no 3/2011) reads in paragraph 2.1.4: “Private
inward remittances through the banks from January to May 2011 increased to $7.1 billion,
from $4.2 billion in the corresponding period of 2010. This development represents 68%
growth. All the five months recorded substantial growth of 67.4%, 64.6%, 73.55, 50.0% and
83.9%, respectively. Even though the value of transfers received by individuals through
banks increased over the 2005-2011 period, nonetheless, the share of individual to the total
inward transfers declined over the period. Of the total transfers in January-May 201, $745.1
12
million (or 10.5%) accrued to individuals, compared with $626.2 million (or 14.8%) in the
first five months of 2010.”
The statistics also bring out an interesting trend. Since the global financial crisis, private
remittances have continued to rise even if at a far lower pace than previously. But, in our
meetings with some of the registered MTOs in the UK, the Netherlands and Germany, they
showed us (in confidence) their volumes of transactions since 2007 and in some cases there
were as much as a 30% decrease in the volumes of transaction since 2007. Thus, the global
financial crisis and its attendant job losses and reductions in incomes have also compelled
more Ghanaians living abroad to find cheaper ways of sending money home. This has
resulted in a boom in the unlicensed money transfer operations, with incentives such as
zero commission and higher exchange rate. This calls for more attention to be focused on
that growing area.
Remittances have an impact on the Ghanaian economy through investment in housing,
which has spinoff effects on a large number of businesses (Mazzucato, van den Boom, and
Nsowah-Nuamah 2004). The rapid growth in migrant remittance volumes to Ghana and the
proliferation of money transfer institutions (both formal and illegal) have boosted the
contribution of remittances to the development and growth of the Ghanaian economy. They
have helped many households get through income disruptions and have financed education,
real estate, and small businesses. Partially offsetting these positive contributions, however,
is the exodus of skilled workers from Ghana to developed countries such as the United
Kingdom and the United States—a migration with a major impact on the country’s
economic and social sectors. However, the country must wake up to a growing
phenomenon which has the potentially of having the illegal money transfer business
overwhelming the formal system, with its attendant implications of facilitating money
laundering activities.
13
Table 1 Private, Official and Total Unrequited Transfers
Year
Total Remittance
(US$ million)
1990
410.5
1991
421.9
1992
470.2
1993
517.4
1994
471.8
1995
523.2
1996
497.9
1997
576.5
1998
751.0
1999
637.9
2000
649.3
2001
978.5
2002
912.4
2003
1,408.4
2009
1,788.0
2010
2,120.0
Source: Bank of Ghana BOP office
29.6%
24.1%
226.5%
Figure 2: Source of remittances to Ghana through Banks (2007)
Source of remittance inflows to
Ghana through banks (2007)
1.57%
2.37% 4.43%
United States and
Canada
United kingdom
14.63%
Europe Minus UK
18%
59%
ECOWAS
Rest of Africa
Source: Bank of Ghana Annual Report 2008.
Note: The data apply only to remittances sent through the banking sector and exclude noncash remittances and
remittances sent through illegal means.
1.3
Macroeconomic Impacts of Remittances
The economics literature has generally considered foreign exchange resources as critical in
increasing a country’s capital output ratio (Addison 20:2004). Foreign capital inflows from
14
sources such as Foreign Direct Investment (FDI), Official Development Assistance (ODA),
Foreign Trade, Transfer of Technology and, most recently, remittances have gained
prominence in these analyses.
Generally, remittances can create a positive impact on the economy through various
channels. The general understanding among various economic thinkers is that remittances
can impact on the economy through savings, investment, growth, consumption, and poverty
and income distribution. The importance of remittance flows become critical in economies
with credit market imperfections as is the case in most developing countries.
One major impact of remittances is its effect on the current account of the balance of
payment (BoP) of a nation’s economy. Remittances help in raising national income by
providing foreign exchange and raising national savings and investment as well as by
providing hard currency to finance essential imports thereby curtailing any BOP crisis
(Adelman and Taylor, 1990, Durand et al 1996a and 1996b, Claudia M. Buch et al 2002).
Bank of Ghana’s estimates of the balance of payments suggest that remittances place
second after exports in terms of resource inflow, notably since 2003.
Essentially, the growth effect of remittances in receiving economies is likely to lead to an
increase in savings and subsequently investment. Migrant workers’ remittances come in as a
component of foreign savings and as such complements national savings by increasing the
total pool of resources available for investment.
Remittances also carry some positive effect on investment in developing countries in
particular. The difficulty involved in raising enough and cheap capital to finance investment
activities implies that remittance can serve this purpose. Remittances are used to finance
several social projects including school buildings, clinics and other infrastructure. In
addition, return-migrants bring fresh capital that can help finance investment projects. In
Ghana, migrants also send money down for the purpose of setting up small-scale business
on their behalf. Aside from the income it generates, employment opportunities are created
for the youth in the respective localities.
15
•
Remittance inflows can improve sovereign creditworthiness by increasing the level
and stability of foreign exchange receipts (Ratha 2007; Avendaño, Gaillard, and
Nieto-Parra 2009).
•
Remittances also help stabilize the current account by reducing the volatility of
overall capital flows (Chami and others 2008).
•
Remittances can reduce the probability of current account reversals, especially when
they exceed 3 percent of GDP (Bugamelli and Paterno 2009).
•
Appropriately accounting for remittances can improve evaluations of African
countries’ external debt sustainability and creditworthiness. Remittances are now
being factored into sovereign ratings in middle-income countries and debt
sustainability analysis in low-income countries.
•
Including remittances in the calculation of the debt-to-exports ratio can provide a
more accurate evaluation of debt sustainability and the amount of fiscal adjustment
that may be needed to place debt on a sustainable path (World Bank 2006; Abdih
and others2009; IMF and World Bank 2009).
•
Including remittances in creditworthiness analysis using the shadow ratings model of
Ratha, De, and Mohapatra (2011) suggests that the creditworthiness of remittance
recipient countries would improve by one to three notches. The poor quality of
remittance data in many African countries makes it difficult to assess the extent of
improvement in sovereign creditworthiness that would result from the inclusion of
remittances in the Africa region, however.
•
The securitization of future remittance flows (and other future receivables) can help
African countries to use future remittances as collateral to raise additional financing
from international capital markets and to reduce interest costs and lengthen the
maturity of bonds for financing development projects such as low-income housing or
power and water supply (Ratha 2005; Ketkar and Ratha 2009a, 2009b).7 Banks in
several African countries, aided by the African Export-Import Bank, have used
remittance securitization to raise international financing at lower cost and longer
16
maturities. Depending on how the financing is structured, Ghana can used inward
remittances for securitization of loans. Remittances do not strictly belong to
Government but it can still be used to provide mitigation for exchange risk.
Ultimately, the country will generate real resources to repay the loans raised on the
international market.
•
Remittances can affect economic growth in a positive manner by raising
consumption and investment expenditures; by increasing expenditures on health,
education, and nutrition that contribute to long-term productivity (discussed further
in the next section); and by improving the stability of consumption and output at
both the household and macroeconomic level. These benefits in turn increase the
supply of investment from both domestic and foreign sources by increasing financial
intermediation, which can ultimately contribute to higher growth.
•
Large inflows of remittances can cause the real exchange rate to appreciate (“Dutch
disease”), which can impair growth if tradeable production imparts external benefits
such as economies of scale and learning effects. But remittances do not appear to
have had a significant impact on competitiveness for developing countries on
average
1.4
Ghana Regulatory Overview
The Ghana regulatory environment in the financial sector has encouraged greater
competition in recent years. Laws such as the Bank of Ghana Act 2002, Banking Act 2004,
Payments Systems Act 2003, Foreign Exchange Act 2006, Banking Amendment Act 2007,
and Non-Bank Financial Institutions Act 2007, are among the wide range of legal reforms
comprehensively affecting the positive growth of Ghana’s financial sector. However, theBoG
has been rather lukewarm in building on the spirit and letter of the Foreign Exchange Act
2006 to further deepen the liberalization process on the money transfer front. It is highly
bank dominated and there are still significant barriers to entry which are driven by
regulatory restrictions and cumbersome approval processes. There is also a high degree of
17
confusion to operators in Europe and the United States as to which exchange rate they
should use for sending money to Ghana. The unlicensed operators merely track the Bank of
Ghana rate for the day and offer a rate to the customer slightly better than the officially
quoted one.
Ghana’s regulatory environment with regards to remittances has changed significantly in
recent years and has led to a more competitive market. However, feedback from MTOs
interviewed for this project has highlighted that there are still a number of areas that need
to be addressed to create an environment that is conducive to creating a more open
and inclusive remittance market.
1.4.1
Types of organisations that are able to offer remittances
The Bank of Ghana is the regulatory authority in Ghana and responsible for controlling the
financial market place. In recent years it has introduced a number of measures that affect
the remittance market, the impact of which are outlined below.
1.4.1.1
Banks and Authorised Dealers
Only Authorised Dealers are able to provide inward money transfer services.
Although the term Authorised Dealers includes banks and foreign exchange
bureaux it is banks that dominate the market place. This is due to a combination
of high capital requirements to be a bank and a strict approval process for new
entrants.
Capital requirements for a bank are GH¢60m (US$42m) and to be a remittance
provider a company needs to have a minimum paid up capital of GH¢7m (US$5m).
These represent a significant barrier to new entrants. Nevertheless, there are
currently 27 banks in Ghana – a country where less than 20% of the population have
bank accounts.
Banks partner with international money transfer companies to act as payout
locations. Bank networks are primarily centered in the main urban areas and are
therefore not able to reach the rural locations. The exception to this is the ARB Apex
18
network which covers a range of rural financial and credit institutions and provides
extensive coverage in rural locations.
1.4.1.2
Agents
Banks are able to appoint businesses to act as their agents. However, each individual
location must meet certain criteria and must be visited by a representative from the
Bank of Ghana. This has resulted in very few non-bank financial agents being
approved or established.
In other countries, e.g. Kenya or Brazil, non-bank retail operations in rural areas have
been permitted to offer financial service products (including remittances) under
regulatory control and this has resulted in a much greater penetration of financial
services into rural areas.
We support an earlier recommendation from a DFID report that a slightly more
pragmatic approach be taken in this area, perhaps based on international best
practice, so that a detailed procedure is agreed with the bank/principal and that it is
not necessary for the Bank of Ghana to visit every potential agent location and ta the
onus should b placed more on the licensed MTO to ensure that its local agents
comply with the rules and regulations of agency.
1.4.1.3
Exclusivity clauses
BoG has recently introduced regulations that make it illegal for a Ghanaian business
to enter into an exclusive agreement with a money transfer company. This means
that a bank is now able to offer the services of more than one international
remittance partner.
Already there are examples of where a Ghanaian Bank
offers both Western Union and MoneyGram services from the same outlets.
Unity Link until recently had an exclusive arrangement with the Ghana Commercial
Bank. This removal of exclusivity must be extended to the Post Office, as well.
1.4.1.4
Branchless Banking
In 2008 the Bank of Ghana issued guidelines for branchless banking (Notice No.
BG/GOV/SEC/2008/21).These guidelines have been issued as part of a broader
19
strategy to create an enabling regulatory environment to promote branchless
banking.
Branchless banking in Ghana is only allowed to be undertaken by licensed deposittaking financial institutions (bank and non-bank) or their agents. Agents can include
fuel distribution companies, merchants, Post Office, etc. and can be using a
range
of technologies, not just those limited to mobile phone (like GPRS, POS
terminals etc.). To ensure maximum connectivity and outreach as well as
interoperability, the ‘many-to-many’ mobile model is the only permissible mobile
model in Ghana. Exclusive partnerships are not allowed. Mobile network operators
(MNOs) must partner with a minimum of three banks who in turn recruit merchants
(where cash-in and cash-out take place).
1.4.2
Foreign Exchange rates
One area that many of the MTOs raised as a cause for concern is the area of the exchange
rate that is used to send money to Ghana.
The regulations state that any organization sending money to Ghana must use the BoG
central rate that is posted every day on their website. This central rate removes the
potential for an MTO to be able to make a profit on the foreign exchange rate charged to
consumers.
Most of the smaller operators in Europe are aware of this regulation and often receive the
appropriate exchange rate from their partner bank in Ghana on a daily basis. However,
some of the larger operators do not follow this regulation or methodology. Their exchange
rates are set by centralised trading rooms using electronic trading systems. They do not
appear to take the Ghana FX regulations into account and often add a foreign exchange
margin.
This difference of approach has led to confusion between operators and an inequality in the
market place. Some of the operators feel that they are missing out on an additional revenue
opportunity by not charging a forex margin whilst others do not feel that there is enough
20
clarity about what the correct legal situation is. Consumers may be paying more for their
remittances than they should be as a result of this situation.
It is recommended that, as a minimum, BoG contacts all banks within Ghana who offer
remittance services and all international money transfer companies that send money
to Ghana to clarify the situation. This should be a clear communication which sets out the
regulations and the responsibilities of the banks and MTOs.
In doing so BoG should
recognise that this is a highly unusual situation in the global remittances market as it is not
normal for a receiving country to mandate the exchange rate that is used by the sending
business and that it is very difficult to enforce. If it wishes to maintain the regulation then it
must be prepared to enforce it. We believe the answer is not in enforcement but in
encouraging competition but a healthy one, protected from any prospect of cartelism.
1.4.3
Transfers outside of Ghana
Ghanaians are allowed to transfer up to $10,000 per annum outside of Ghana from their
bank account. This service can only be provided by banks and most Europe based money
transfer companies requested the ability to be able to offer international transfers
from Ghana. This would have the potential advantage of encouraging more people to use
the mainstream financial services and may improve financial inclusion in Ghana. Millions of
dollars worth of import transactions are facilitated every month through informal MTOs. A
lot of importers of second hand goods are forced by stringent regulations and restrictions to
patronise the ‘no questions asked’ informal MTOs. This is a huge area which the Bank of
Ghana should be focusing greater attention on and engage importers of second hand goods,
especially, in seeing how it can better facilitate their international transactions. It is this
trade that has pushed some spare parts dealers for themselves to serve as unlicensed
MTOs. Some have also made arrangements with the Ghanaian shops and business people
abroad, involved in unlicensed money transfer business, for their counterparts abroad to
provide the funds for their purchases over the for the importers to pay them back home inn
cash.
21
1.4.4
Payment systems
Whilst outside the scope of this report, it is relevant to make brief mention of the fact that
Ghana has established
a National
Payment
Switch
(E-ZWICH)
which allows the
establishment of a common platform for all domestic payments which is resulting in the
integration of all the existing bank switches and will allow those banks that do not have
switches (e.g. ARB Apex Bank) to join a common switch at significantly reduced costs. The Ezwich serves partially as a financial entity card. With transactions authenticated by it, the
issue of money laundering could be dealt with since each transactor can be uniquely
identified. It also allows for the interoperability of all ATMs and the settlement of payment
transactions by customers of different banks at points of sale (POS). These changes should
result in remittances being even more flexible and act as a strong entry point to
encourage remittance receivers to use newer methods of technology which in turn will lead
to greater financial inclusion.
At the current time ATM and POS penetration is low and programmes that are driven by
banks but encouraged by Government are recommended. Rural banks can play a key role in
widening thee network of international money transfer operations because of their
presence in areas usually not served by the commercial banks. Western Union is one MTO
that has recently linked up with the rural banks in Ghana. This could see this multinational
company pulling more senders from the other MTOs into its fold.
1.5
Money Laundering
According to the U.S. Federal Bureau of Investigations, the International Monetary Fund
believes that money laundering may account for 2% to 5% of the world’s gross domestic
product, estimated to be as high as $3.61 trillion.
The Tax Justice Network, an independent organization launched in the British Houses of
Parliament in 2003 dedicated to analysis and advocacy in the field of tax and regulation,
reported that developing countries lose an estimated $858.6 billion – $1.06 trillion annually
in illicit financial outflows.
22
Money laundering also has an effect on national policy because of mistakes in measurement
errors on national account statistics and it also threatens monetary instability due to
unsound asset structures in commodities, according to the United Nations Department of
Public Information.
The trade in illicit drugs is estimated to be worth $400 billion a year, and it accounts for 8%
of all international trade, according to the United Nations. In order to invest the profits of
their illicit activities and avoid having their assets seized by the government, drug traffickers
must transform the monetary proceeds from their criminal activity into revenue from
apparently legal sources. This is known as money laundering.
Though there are many ways to launder drug money, the process generally involves three
basic stages.
The first stage, "placement," entails disposal of the drug proceeds into domestic banks and
foreign financial institutions.
The second stage, "layering," moves funds between multiple financial institutions to hide
their source and ownership and to disguise the audit trail. This can involve wire transfers or
shell companies in offshore havens.
In the third stage, "integration," a legitimate explanation for the funds is created. This can
be done, for instance, via front companies, false invoicing, purchase of financial instruments
(stocks, bonds, and certificates of deposit), or investment in real estate, tourism, and other
legitimate businesses.
Innumerable schemes have been devised to hide the large sums of currency that are
generated by illicit drug sales. One method, "structuring," involves breaking up large
amounts of cash into transactions that amount to less than $10,000 to avoid currencyreporting requirements.
These illegal routes or transfer agencies provide the perfect covet cover that enables the
movement of such illicit monies easy. In Ghana, very substantial amounts can be easily
moved and received without formal detection. The secrecy these agencies provide is
enough attraction for the would-be user as they usually would not want to face queries
about their source of funds and business activities from the prying eyes of government and
23
intelligence agencies. Their identities are thus adequately covered and protected with the
use of these illegal transfer agencies. The substantial amounts of drugs that arrive in Europe
transiting through West Africa without being detected at the various ports are suggestive
evidence that the ‘local drug couriers and agents’ are receiving funding from their
paymasters for their middlemen activities/roles.
24
CHAPTER TWO
2.1
DI Research
It is well documented that a large portion of remittances to Ghana are transferred through
illegal channels, and this method reduces the potential contribution of remittances to
development—through financial sector deepening, credit multiplier effects, savings, and
investment. Remittance flows outside the formal financial sector also raise issues of money
laundering and other financial crimes.
To address concerns of Money Laundering and its effects on the Ghanaian economy, the
Danquah Institute inarch 2010, invited a leading legal expert on money laundering and
offshore banking, John Hardy QC, to Ghana to deliver a paper on the subject. The theme of
the lecture was “Dealing with Money Laundering: Protecting Ghana’s Emerging Financial
Offshore Centre Status”
As a follow up to this event, the Danquah Institute undertook a three month long research
to assess the extent of the illegal money transfer operators with regards to Ghana’s3 largest
Europe remittance corridors (United Kingdom, Germany and The Netherlands). In doing so,
we sought to address issues regarding the Ghanaian regulatory environment, the products
and services available on the market and the remittance patterns.
From Figure 1 (Sources of Remittances to Africa and All Developing Regions in 2010) and Figure 2
(Source of remittances to Ghana through Banks 2007) it is quite clear that the largest sources of
remittance to Africa are from the United States and Western Europe. Figure 2 also Ghana is
no different, as
25
2.2
Objectives
This study thus aimed to aims to address two of the components:
1.
2.
Legal and regulatory constraints to the use of formal remittance channels in
Ghana
Identifying which means of money transfer respondents preferred
The report also recommends measures to leverage on synergies between the sender end
and demand side of the remittance value chain.
2.3
Methodology
A range of methods were employed in the completion of this project to ensure that
an accurate depiction of the barriers and challenges experienced by stakeholders was
provided. To understand the needs and demands of the Ghanaian Diaspora that use money
transfer services, DI conducted an in-depth survey of 300 Ghanaians living in the UK and 103
Ghanaians living in Germany.
The exercise which targeted all classes of community members, irrespective of gender, age,
educational background, religion, cultural and political affiliation was carried out 24 hours –
this means interviews were conducted any time any day. This was to give a cross section of
the community a fair and balance representation.
2.3.1
Research Format (Interview Form) in UK
One simple interview format was used. It was an illegal or the conversational type of
interview. As many people as possible from within the Ghanaian community, church
leaders, shop owners and media practitioners were interviewed. In all over 300 people were
interviewed across the UK, some of them via the telephone.
There were no predetermined questions asked, almost everything was like an illegal
discussion that our researchers had on the subject with the interviewees. In some cases the
chat involves one or more people.
26
2.3.2
Research Format in Germany
A predetermined set of questions were posed to respondents with 103 respondents in all
availing themselves to the process. Respondents were drawn from a cross section of the
Ghanaian Diaspora in German and from all age groups.
2.3.3
Focus Groups
Two different types of focus groups were held:
1. Illegal Market: due to the difficulty in identifying the illegal market, by its very
nature, a focus group was held in order to understand from the consumers’
perspective its popularity, benefits and perceived risk.
2. Feedback and Comment from MTOs: once all primary and secondary research
had been collected and ideas and findings formulated, a number of focus groups
were held with Ghanaian Money Transfer Operators to obtain further feedback on
the overall results and conclusions and to discuss the recommendations.
27
CHAPTER THREE
FINDINGS OF RESEARCH
3.1
RESEARCH RESULTS (UNITED KINGDOM)
Why People transfer Money: The survey revealed that nine out of every ten Ghanaians in
the UK do organise monies for some kind of purposes back home. Six out of ten send
monies regularly, in most cases monthly, while the rest send monies quarterly or every
other month with a few sending monies occasionally. Out of the 315 people interviewed
only six had never remitted any money at all to Ghana. Two of them had only been in the UK
for less than a year while the other had not been in employment for some time.
According to the findings, there are several reasons why Ghanaians in the UK send monies
back home, paramount among these is the reason for support friends and relatives back
home. The figures show that more than 60 percent send monies back for this reason.
Millicent Kwabi who works as a Cleaner at a hospital in Manchester observed that she is
compelled by the circumstances of leaving her husband and two kids in Ghana to send
monies to them monthly. “I also have to, at times give something to support my dad and
mum”, she confirmed.
Table 2: Frequency with which money is remitted home (UK)
City
Number of Respondents
Monthly Quarterly Yearly
Occasionally
Not Sure
Manchester
58
20
10
6
4
18
London
129
32
25
12
20
40
Leeds
13
2
1
6
0
4
Birmingham 28
6
2
9
7
4
Reading
46
10
10
9
8
9
Bracknell
38
18
8
9
2
1
28
Monies are sent in relation to needs and others factors. In Manchester, for instance, out of
the fifty eight (58) people interviewed, eleven (20) of them transfer monies to Ghana
monthly, while six (10) do same quarterly with five (6) of them remitting annually. Three (4)
of them send monies occasionally and eighteen (18) have no clue of their remittance
schedule.
Another group of respondents said they are engaged in projects and that there is the need
to send monies to Ghana. Five people in Manchester interviewed said they are putting up
houses in Ghana. A respondent who simply gave his name as Yaw said since July 2006, he
has sent nearly twenty thousand Pounds (20,000.00) to Ghana. When quizzed as to whether
all that was sent reached for the purpose? He said “well what can you do? But the building
is completed and it is fine, I like it.”
There are a section of the members of the Ghanaian community in the UK whose money
transfer ‘attitude’ could be best described as responsive. This is where money is urgently
needed in Ghana for urgent reasons. Key among such factors are illness and school fees.
There are other few times that monies are sent to Ghana for funeral purposes. The research
showed that almost all the respondents have, one time or the other, responded to calls
from Ghana to send money.
During festive occasions like Christmas and Easter, people send monies to relatives and
loved ones in Ghana. According to our respondents there were at times people have to send
money to Ghana for wedding ceremonies. Nketia said he had promised his younger sister
and therefore had to foot more than half of the cost of the wedding last year. According to
him one thousand Pounds (£1000.00) was transferred to Ghana in August last year for the
wedding.
For the two hundred and fifty respondents interviewed within predominantly Ghanaian
communities in the UK on why they send monies to Ghana, the reason of Funeral topped
the list with 26%. Projects back home followed by 16% with Illness and School Fess taking
14% each. There were other reasons such as family and friends’ supports as well as wedding
and other occasions which were assigned as some of the reasons.
29
Reasons for Money Transfer
School Fees
14%
Other Support
13%
Other
Occasion
10%
Wedding
7%
Funeral
26%
Projects
16%
Illness
14%
Figure 3:: Reasons for which money is remitted home (UK)
3.2
Forms of Money Transfers Systems
3.2.1
Formal Money Transfer Operators
In the UK, there are a number of means to transfer money to Ghana. The most common
ones are those operated by Money Transfer Companies. These are done as per regulations
and laws governing them.. Within the Ghanaian
Ghanaian communities there are about fifteen major
Money Transfer Companies operating.
These include the giants in the business globally, Moneygram and Western Union. Others
include, Unity Link, Express Funds, Integrity, First Africa, Samba, First Africa Remittance,
Rem
Coinstar,
r, RIA, Jamaica National, Swift and Lawrence Associates. These operate mainly from
the Ghanaian Shops and institutions. Others agents for these include the hairdressers,
barbers, Travel Agents, mobile phone repairers, CD shops, among others.
others
An operator who preferred to remain anonymous said they use these small businesses
mainly due to the high number of visitors they receive daily. They are also much known in
the community and the trust and confidence the community repose in them are also major
factors.
Investigations revealed that six out of the lot are registered with the UK Money Transfer
Association as members though most of them are registered with the regulatory body – The
Finance Service Authority. Some of them also are foreign based and have their registrations
outside the UK but only have commitments to laws and regulations of the authority.
30
Coinstar, First African Remittances, Jamaica National, Lawrence and Associates, RIA, Express
Fund Money Transfer among others are on a register, at least.
Apart from this, the MTOs also have their own offices and other forms of doing the
business, such telephone transfers where registered clients call into the offices of the MTO
and do business with them.
3.2.2
Illegal Money Transfer
The second form of transfer is also very popular and well patronised. This is mainly
administered by individuals who have not registered with any authority. It is normally
operated from the shops and homes. They take undue advantage of what they do for the
registered MTOs and operate around it. Their commissions are rather very low. It is
between one and two Pounds per £100.00 sent.
The third is similar to the second but the only difference is that huge transactions are
involved. It comes with a very high risk on the part of the sender. With this, business people
who are unable to carry huge sums of monies across the borders of the two countries,
engage people in the communities to organise monies in Pounds in the UK for them while
the senders picks up the Cedi component from friends or business partners in Ghana. Anim
in Manchester said “this system has been the only means that I have used to trade over the
years and I have been very faithful to the people so they all have trust in me.”
It was deduced from the research that in about 99 percent cases there are no commission
and also people who are transferring huge sums of monies wanting to avoid transfer
bureaucracies end up with this choice.
Under the regulations, transferring more than £900.00 from the UK to Ghana requires the
sender to produce a form of identification. This requirement, for many a Ghanaian becomes
a ‘red tape’ and will want to avoid by sending through such business men.
There is another system of Money Transfer which is ‘very illegal’. It is built upon familiarity
and trust. With this monies are sent through familiar person or someone travelling to Ghana
who has been recommended by a friend or relative.
31
One other identified form of Money Transfer is perhaps not well known but considered by
people involved safe, convenient and reliable. One or two Ghanaian Banks and financial
institutions are operating off shore banking services in the UK through agents. Customers of
the banks pay monies into their accounts in the UK and can withdraw in Ghana without
charges and problems. The HFC bank and the Ghana Home Loans are leading in this
direction.
An Agent of the HFC Bank, Mr. Martin Kwapong said currently nearly two hundred people
has signed up with the HFC offshore banking and several thousands of pounds have been
paid into accounts since 2006.
The research has it that last year alone nearly three million Pounds were deposited into the
offshore accounts of one the HFC.
Another one identified form of Money Transfer is operated uniquely by the Lebara Mobile
Telephone Company. This is where a customer is issued with a cash card and then one to a
recipient in Ghana. The customer pays the money in the UK onto the card and the recipient
uses the other card to instantly withdraw the money from any ATM machine in Ghana.
The Omanye E-Payment System could also be described as a type of money transfer system.
With this the customers can easily remit money via a mobile phone technology to recipients
in Ghana.
3.3
Operators
The survey unearthed a number of Money Transfer Operations (MTOs) from the UK to
Ghana. There could be best categorized into three. First there are the mainstream ones who
have been registered by the authorities. Secondly, others found operated by shops and
other offices and the third group are those operated by individuals.
(a) In the UK, there are a good number of Money Transfer Businesses under this category.
They include Western Union, MoneyGram, CoinStar, Vigo, Jamaica National Swift,
Express Funds, Unity Links and
32
(b) The second category includes those that are not registered with the authorities but are
well known to the community. This has been possible by the businesses they offer the
community. For instance Wayosi provides caring services for relatives of some members
of the community and also owns a large number of shops across the UK. This is also true
with Kumasi market among other shops. Others include Kejetia market, GNTC, Kumasi,
Integrity Money Transfer, Kwamina Money Matters, Nana Barbers and more. The tactics
is that some of them are agents of the mainstream operators and under that cover they
convince customers to patronise theirs as well.
(c) The third category is operators by individual or groups of few people who are mainly
business people who trade between the two countries. – Ghana and the UK. These
people take monies from individuals in the UK for their businesses and pay to relatives
or friends in Ghana. This is deemed very convenient for these traders who use this
system to avoid money laundering. These people pick up huge sums of monies than
even those in the formal sector. For example Yaw Mante who does business in Ghana
and the UK said he has received nearly £400,000.00 within two months in the UK and
paid the corresponding amount to recipient in Ghana.
3.3.1
Money Transfer Options
The Chart below provides a graphical presentation of the preferred money transfer system
of the Ghanaian living in the UK. From the research, the more preferred money Transfer
Systems or Companies include Unity Link, Express Funds, Lawrence Associates, Integrity,
Western Union, Coinstar, RIA, MoneyGram, Samba among others. Nevertheless a quiet
good number of the respondents said they transfer monies through un-approved sources
like Shops, Individuals such as Wayosi, Kwamina Money Matters, Kejetia Market and Kumasi
Market.
The research revealed that Unity Link Money Transfer happens to be the leading operator in
terms of patronise and popularity. Mr. Kevin Basson, the General Manager, said in an
interview that the company transacts an average of 5,500 individual transactions monthly. A
figure that was not seen anywhere. Our research also confirmed that the 284 individuals
33
across the UK interviewed of their choices of money transfer operator, 60 of them
representing 21 percent (21%)
21%) preferred Unity Link.
The reasons were not farfetched. The collections points scattered around Ghana through
the Ghana Commercial Bank among others as well as the numerous agents plus the four
offices operated in the UK make it easier and safer for customers
customers to transact business with
them.
Cion Star
Express Funds
11%
4% 4%
Intergrity
15%
Jamaica Natuion
13%
8%
Money Gramme
5%
21%
Ria
3%
10%
Samba
Swift Money Transfer
4%
2%
Unity Link
Western Union
others
Figure 4: Choice
ce of Money Transfer Operators
Lawrence Associates and Intergreity Money Trasfer are making significant strides even
though they have not been in the business for long.
long
They have pragmatic marketing strategies and easy methods of sending monies to Ghana
from the UK. Lawrence Associates, for instance, have an on-line
on line as well as phone systems of
sending money. Alberta of Lawrence Associates said in an interview that first time
customers are made to be long time customers by registering them and providing them with
facilities that will make it easier for them to transfer monies to Ghana from wherever they
are.
For now, the issue of commision is not a big issue regarding the choice. Almost all of them
charge rates that are within the reach of the people apart form Westren Union. The lowest
so far with the registered operators are Express Funds and Lawresnce Associates. The two
34
charge £4.00 commisoin normally but for their registered customers they cahrge £2.75 and
£3.00 per up to £100.00 .respective. A move that has seen their customer figures rising in
recent times.
Table 3: Money Transfer Commissions per up to £100.00
Coin Star
£5.00
Express Funds
£4.00
Integrity
£4.00
Jamaica National
£4.00
Money Gramm
£4.99
RIA
£4.00
Samba
£4.00
Swift Money Transfer
£4.00
Unity Link
£4.00
Western Union
£7.00
Lawrence Associate
£4.00
The exchange rates to most of the customers is also not an issue. To them what matters
most is how safe and swift the monies will get to their recipients. “I want my mother to get
the money I send to her at my home town Mpraeso without travlling or no one going to get
for her” Anima noted in an interview.
3.4
How much is transferred
With the mainstream Transfer companies, they remit an average of between 700 thousand
Pounds (£700,000.00) and three million Pounds (£3,000,000.00) a month. There are about
15 registered such companies operating in the system.
Figures from our survey again indicate that Unity Link Money Transfer holds the the biggest
chunck of transfers from the UK to Ghana. According to the General Manager an average of
about three million Pounds (£3,000,000,.00) is sent to Ghana monthly onbehal of people.
35
The chart
hart below suggets the average quantum of money sent to Ghana from the UK by the
MTAs per month.
Table 4:: Total amount of money remitted by MTOs
£3,000,000.00
£2,500,000.00
£2,000,000.00
£1,500,000.00
£1,000,000.00
£500,000.00
£0.00
On the part of money transfer businesses operated from the shops, homes and at time
churches, they share the market some how with the mainstream operators. Amadu of
Express Funds Money Trasfer and Kevin of Unity Link are of the view that these unregistered
operators hold between 40 and 50 percent of the money transfer business with them. This
might be attributed to the reasons assigned earlier. Members of the community are very
familier with these kind of operators, - and there appears to be a bond between them,
which generates a lot of confidence and trust. “They (unregistered operators) use our
service as bates to attract their customers. We suspect that people patronise their business
than ours because they have direct access to the customers.” Kevin noted.
note He said “the
business they do for us is not encouraging”
For the fact that they are not registered, it is very risky to deal with them but figures suggest
that they vertually share the market with the mainstream operators. These people do so
chiefly with
th trust and familiarity. Almost all respondents were of the view that owners of
36
these shops as well as the individuals are personally known to them or were introduced by a
friend or relative.
They also consider these ‘outlets’ as convenient and easily accessible. At the Manna Super
Store in Woolwich, for instance, six people who made transfers at the place within a
particular time on a particular day out of seven were customers and friends of the shop
owner.
These operators also do have local agens in certain parts of Ghana, mainly in Kumasi and
Accra. In Accra for instances, the survey revealed that Kantamato and Abosoikai are the
major collection points while Adum and Kejetia are set as collection points in Kumasi. Very
few of them have agents in areas like Sunyani and Koforidua. Reciepients therefore have to
travel from whereever they are to these points to pick up their remittances.
Our research figures indicatate that more than 30 such operations go on across the UK
regarding money transfers from the UK to Ghana.
The last category of money transfer from the UK to Ghana is another area of unnoticed brisk
financial activity. The research revealed that eight people transact such money transfer
business. They can pick even up to £20,000.00 depending upon the availability of funds with
their ‘agents’ in Ghana to pay the equivalent or refund in Pounds to the recipient. For them
commission is out of the equation. They only need the cash to transact their businesses in
the UK. Akwitei said he has received £300,000.00 form ‘clients’ since he arrived in the UK
three weeks ago.
During the search eight such people were identified. Two of them spoke illegally but the rest
declined to speak, thus sensing the illegality of their business. For some of them it is
extremely difficult to speak to directly on money transfer issues. One has to speak through
other people who will confirm that they know you.
This is an area that sees much of the monies especially the huge ones used as transfer
channels. According to officials of the mainstream money transfer operators, this is a wide
spread illegal activity but very difficult to address. “It is thwarting our growth as a business.
Mr.Basson of Unity Link noted.
37
Many people with huge sums of money prefer this system for two reasons. One, there is no
requirement of any identification document and records of what you send as required by
law when transferring more than certain about of money, for example £500.00 at a go.
Number two, most often than not, the sender can negotiate on the exchange rate which in
most cases is better than the official Bank of Ghana rate. For instance when the Cedi was
GNC2402.00 in July 2011, some of these people were ready to pay GNC2500.00. This
obviously is a motivating factor to use their services.
The reality is that there are more of such people in the system sending millions of Pounds
through the illegal sector annually. And the whole sector of illegal money transfers is
gradually gaining root and getting substantial patronage. This is against the background of
the huge risk it posses to their ‘customers’ and the threat to their mainstream competitors.
Evidence are that people are beginning
to stop using bank transfers which go with
commissions and other charges and turn to these individuals. This is particularly so with the
self-style’ business men and women whose sole business is to buy from the UK and sell in
Ghana. These people are not ready to go through the money transfer bureaucracies as well
as paying commissions on the transfers they make. To them this is easy, fast and convenient
to them but forget the risk to the senders.
There is also a climate change in attitude from some Ghanaian remittance senders. It is
becoming increasingly attractive to send money the illegal way. For instance, when people
continue to transfer’ money without charging senders because they benefit hugely than the
senders, many people will shift to them. The only disadvantage to this is they will not take
anything less than £400.00 normally.
Nevertheless the market also, is in a way, changing with increasing opportunities for the
mainstream operators to take advantage of the media and their association, the UKMTA, to
hit at this for a change bearing in mind that according to the World Bank whose last
published figures for global remittances are $350billion - they also maintain that the same
figure again has been moving illegally. For this to change will chiefly depend on a pragmatic
strategy.
38
3.5
Research Results Germany
Gender of Respondents
34%
Male
Female
66%
Figure 5: Gender of Respondents (Germany)
A total of 103 respondents were surveyed with 66%, 68, being men. 34% of respondents
were females.
Respondents by age category
50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%
43.70%
35.00%
11.70%
9.70%
18-25
25-40
41-50
50+
Figure 6: Age grouping of respondents (Germany)
45 of the respondents representing 43.7% were within the age group of 25-40. 35% of
respondents were within the age group of 41-50 years with 11.70% of respondents being 50
years and above. 9.7% of respondents were aged between 18 and 25 years.
39
35.0%
30.0%
How often
do you send money back
29.1%
home?
26.2%
25.0%
20.0%
15.0%
10.0%
5.0%
11.7%
8.7%
5.8%
4.9% 3.9%
2.9%
6.8%
0.0%
Figure 7: Frequency with which money is remitted (Germany)
A majority of respondents, 30 out of 103 respondents representing 29.1%, stated that they
send money back home to Ghana once every month. 14 out of the 30 respondents who
send money home once every month were within the age bracket of 25-40, with 13 of the
30 respondents being within the age group of 41-50.
26.2% of respondents, i.e. 27 out of the 103 respondents, did not have a frequency with
which they send money back home. 10 (9.7%) out of these 27 respondents were within the
age group of 41-50, 7 (6.8%) were within the age group of 25-40 and 5 (4.9%) respondents
each were within the age group of 18-25 and 5o+
11.7%, i.e. 12 out of the 103 respondents, send money once every 3 months, 8.7% send
money once every two months. 6.8% of respondents send money only when the money is
available. 5.8% of respondents stated that they never send money home primarily because
they have no relatives back home or that they know off.
40
How much do you remit? (Euros)
30.0%
26.2%
25.0%
20.4%
20.0%
15.0%
16.5%
12.6%
10.7%
10.0%
5.8%
4.9%
2.9%
5.0%
0.0%
50
100
150
200
300
500
1000
Varies
Figure 8: Money remitted to Ghana (Germany)
26.2% of respondents stated that they remit €200 back home whenever they get the
opportunity to do so. The age group that largely remitted €200 was the 25-40 age group.
20.4% of respondents stated that they send home varied amounts of money when they get
the chance to do so, also with the 25-40 and 41-50 age groups being largely responsible for
this. 4.9% of respondents mainly, a majority of who are in the 50+ age bracket, send €1,000
back home to Ghana whenever it is possible.
Beneficiaries of remittances
66.0%
70.0%
60.0%
50.0%
40.0%
30.0%
19.4%
20.0%
10.0%
5.8%
0.0%
5.8%
2.9%
0.0%
None
Family
Friends
Spouse
Self
Secret
Figure 9: Beneficiaries of remittances (Germany)
66% of respondents stated that they send money back home to Ghana for the upkeep of
their families. Family in this case refers to parents and siblings and also for the payment of
school fees of children. 28.2% each of the age brackets of 25-40 and 41-50 were those who
41
sent money to their parents. 19.4% of respondents stated that money remitted to Ghana
was for their personal use. Personal use here specifically refers to building projects and
deposits into their personal bank accounts here in Ghana. 5.8% of respondents stated that
they remit money to their spouses in Ghana.
How long it takes to send money
through preferred sending route
90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
79.6%
5.8%
N/A
8.7%
1-15 mins 30 mins
1.9%
1.0%
2.9%
1 hour
1 day
2 days
Figure 10: Duration it takes to remit money through preferred sending routes
As to the length of time it took respondents to send money at the premises of the formal or
illegal routes, 88.3% stated that it took between 1 to 30 minutes to send money. However, it
must be clarified that a large majority of the 8.7% respondents who stated that it took 30
minutes to send money was in the premises of the illegal sector. Three respondents stated
that it took 2 days to complete the process of sending money back home.
42
Preferred remittance route
80.0%
68.9%
70.0%
60.0%
50.0%
40.0%
25.2%
30.0%
20.0%
10.0%
4.9%
1.0%
0.0%
N/A
Formal
Informal
No Comment
Figure 11: Preferred remittance route
A total of 71respondents, representing 68.9%, out of the 103 respondents surveyed stated
that they preferred the formal route of sending money as opposed to 25.2% who preferred
to use the illegal or unlicensed money transfer operators. The 25-40 and 41-50 age groups
accounted for a majority of respondents who preferred the formal route, with 53.4% out of
the 68.9% who opted for the formal route. 13.6% out of the 25.2% of respondents who
prefer the illegal route were also within the age group of 25-40 years. 1% of respondents
preferred not to comment at all about the route they preferred.
Reasons for choosing preferred
remittance route
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
72.8%
19.4%
5.8%
N/A
0.0%
1.0%
Convenient
No i.d
required
1.0%
Lower
Charges
Figure 12: Reasons for choosing preferred remittance route (Germany)
43
Trusted
No
Comment
72.8% of respondents, largely respondents who preferred the formal route, stated that they
preferred sending money through these routes because they could be trusted to deliver
money to recipients on time. 19.4% of respondents stated that their sole reason of
choosing a sending route was because of the lower commission rates charged. Not
surprisingly, all 19.4% of respondents who stated this as their reason preferred the illegal
money transfer operators. 1% of respondents also stated that the non-provision of ID cards,
once again by the illegal route, was the reason why they preferred sending money through
that route.
How long it takes for recipients to
receive money
50.0%
38.8% 39.8%
40.0%
30.0%
15.5%
20.0%
10.0%
5.8%
0.0%
0.0%
1 week
1 month
0.0%
N/A
1-30 mins
1 day
2 days
Figure 13: Length of time for recipients in Ghana to receive money (Germany)
78.6% stated that they get their money within 30 minutes to within the same day when the
money is transferred to them from Germany. 15.5% stated that they received money only
after 2 days or more from the time the money is transferred from Germany. All 15.5% of
respondents belonged to the class of respondents who preferred to use the illegal route.
44
knowledge of Money Transfer
Operators
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
68.0%
47.6%
17.5%
1.0%
2.9%
3.9%
Figure 14: Knowledge of Money Transfer Operators in Germany
68% of respondents, 70 out of 103 respondents sampled, knew of the operations of
Western Union Money transfer. Some of the respondents who know of Western Union state
this as their preferred.
This was followed by 47.6% of respondents who know of the
operations of Money Gram. 3.9% mentioned “Malata”, an unlicensed money transfer
operator in Germany. 17.5%, 18 out of 103 respondents, stated that had no knowledge of
money transfer operators. These respondents are therefore likely to patronise the illegal
money transfer operators. 2.9% of respondents mentioned Unity Money Transfer as the
money transfer operator they knew.
45
Problems remitting money?
10.7%
Yes
No
89.3%
Figure 15: Any Problems encountered during the process of remitting funds?
89.3% of respondents stated they no problem whatsoever with regards to remitting money
from Germany. 10.7%, on the other hand, stated that the main problems they faced
remitting money was the undue delays recipients in Ghana face when receiving the money.
The provision of identification was also one of the problems stated by the 10.7% of
respondents.
Employment Status
100%
90%
80%
60%
40%
20%
5%
5%
Unemployed
Self Employed
0%
Employed
Figure 16: Employment status of respondents
90% of respondents stated they were employed, once again, with the 25-40 and 41-50 age
groups forming the majority of employed respondents.
46
Ideas to improve process of remitting
money
70.0%
61.2%
60.0%
50.0%
40.0%
32.0%
30.0%
20.0%
10.0%
5.8%
1.0%
0.0%
Legalise
Lower commision
No idea
Education
Figure 17: Ideas from respondents to improve money transfer operations
61.2% of respondents stated they had no idea regarding what measures could be adopted
to improve the money transfer operations, 32.0% stated the lowering of commissions would
be one sure way of helping to improve the process of remitting money and obviously getting
more people to use the formal route of transferring money. 5.8% of respondents stated that
educating the general Ghanaian public on the process of money transfer could go a long
way to helping improve money transfer operations. 1% asked that the illegal money transfer
operators should be legalised since their rates were lower.
3.5
Findings from Holland
In Holland, the main competitors are Western Union, Ria, GWK, Suri Change.
Shoan, an accountant at Unity Money, stated that the global financial crisis has led to a
reduction of 20-30% of their business. Average amount of money per transaction is less
now.
The higher amounts are now going through the illegal sources due to tighter regulations.
According to him, the Bank of Ghana should create a financial police to clamp down on the
illegal business. According to Schoan, regulations must come from both sides to be effective
to ward off unfair competition from the illegal MTOs. They have complained to authorities
in Holland but to no avail.
47
Schoan posed a rhetorical question: How do the illegal MTOs make their money as their
rates are lower than the official rates?
In his opinion, every Ghanaian shop is a potential MTO.
Cost of freight, duty has gone up over the last few years. Sometimes it cost them double of
what the container load of food stuff cost them. As such it is difficult to pass the cost onto
the consumer. Again the Ghanaian shops are facing increasing capacity from bigger Asian
exporters/importers.
Asians have money to ship more and as such the Ghanaians prefer to go to buy from the
Indians. The money transfer business has become a life saving enterprise for them.
Holland and Germany have strict rules and as such forcing more people into the illegal MTO.
Association of MTOs in Holland and Germany are asking for this to be relaxed. Independent
legal companies are under threat from the illegal MTOs.
3.6 Interview with Money Transfer Operators (UNITY MONEY
TRANSFER)
The interview with the Money Transfer Operators was part of the focused group discussions
undertaken
1. What's the name of the authority in your country that regulates money transfers?
AFM (AutoriteitFinanciëleMarkten) and DNB (De Nederlandsche Bank)
2. What are the regulations on senders providing ID?
All new customers have to provide valid, not expired, ID (e.g. Passport, European
Identity card etc.)
3. How much can a sender send per transaction?
€ 3500, - a day p.p.
4. Can money transfer companies have agents? If so are the rules too stringent?
Yes money transfer companies can have agents. Compared to UK, I think the Dutch
rules are more stringent. Agents have to provide a lot of paperwork and the
company that the agent is attached to has to prove that the agent is able to
48
function as an agent and has knowledge of the money transfer business. The
Company has to provide a sort of testimonial for the agent in question.
5. How many money transfer companies (MTCs) use the corridor from your country to
Ghana?
Western Union, Moneygram, Moneytrans, RIA, Suri change, GWK, Travelex, OR
Finance, Goffin and Kaah Express. All these companies have several agents.
6. How long have you been operating?
Since 1994
7. How many clients do you have on your database?
About 5,000 active clients
8. What's the average amount sent by sender per transaction?
€ 170,- approx.
9. How has global financial crisis affected your business?
It has been of big influence, Sales dropped down about a year after the crisis
10. How is illegal money transfer affecting your business? In your view do more Ghanaians
use the illegal sector than the formal?
It is costing us money, because sales have gone down by clients using the illegal/
illegal money transfers. We have no actual proof but we suspect that more
Ghanaians use the illegal/ unlawful route than the formal one.
11. What can Bank of Ghana do to help your business?
• Allow two way traffic (sending and receiving)
•
Punish the people in Ghana who actually are committing the crime (the illegal
agents) and maybe punish the people/ clients using the illegal transfers
•
Create awareness amongst the people in Ghana and warn them about the
consequences
•
Lowering the bank rates
12. What can the regulator of your host nation do help your business?
• Pursue and punish them with fines and imprisonment
49
•
Make it more easy for the illegals the official business to become agents/ or
a money transfer business there selves
•
Create awareness with the people of the consequences of doing illegal
business
13. In your view how is the unlicensed money transfer agent able to quote an exchange rate
cheaper than official BoG rate?
They don’t pay for costs because of:
-
Contributions for Dutch Central Bank (DNB)
-
Costs of overhead
-
Bank costs
-
Etc.
14. What other factors may be affecting your business?
New development in sending money home by internet/ electronic banking (at
home pc’s) and mobile top ups/ transactions, e-Zwich etc.
3.7
Interview with Universal Money Transfer (GERMANY)
1. What's the name of the authority in your country that regulates money transfers?
BaFin
2. What are the regulations on senders providing ID?
All new customers have to provide valid, not expired, ID (e.g. Passport, European
Identity card etc.)
3. How much can a sender send per transaction?
€15,000 maximum
4. How many money transfer companies (MTCs) use the corridor from your country to
Ghana?
Western Union, RIA, Money Gram, Ftransfare and Illegal operators
5. How long have you been operating?
Since 2002
50
6. How many clients do you have on your database?
Roughly 10,000
7. What's the average amount sent by sender per transaction?
€85
8. How has global financial crisis affected your business?
It greatly affected our business as remittances dropped.
9. How is illegal money transfer affecting your business? In your view do more Ghanaians
use the illegal sector than the formal?
10. What can Bank of Ghana do to help your business?
To stop Illegal operators in Ghana
11. In your view how is the unlicensed money transfer agent able to quote an exchange rate
cheaper than official BoG rate?
• They have less expenditures
• No Tax payment to Government
• No overheads and both way money traffic
12. What other factors may be affecting your business?
• Competition from illegal operators/Agents
3.7 Examples of Companies Involved In Illegal Money Transfer in the
Netherlands
Name of Company
Trans Africa Travel
Kay’s Candies
Address
Tel
Eeftink 100R
+31 206951202
1103AE Amsterdam
The Netherlands
Harriet Freezerstraat +31 206007238
95
1103JP Amsterdam
The Netherlands
Director
Contact Person in
Ghana
Mr. Osei
Mr. Apenkwah
Bediako
Sister Vida (Odorkor)
• 024-9692155
• 027-6931343
Mr. Osei (Odorkor)
• 026-4274787
• 026-4998662
51
Nana’s Artifacts
3.8
Wood carvings,
kente, byoux
Bijlmerplein 689A
shopperhal
AmsterdamsePoort
1102DZ
Tel: +3106977710
Mob: +31643097566
Abena (Kumasi)
• 0244-389964
Osei (Kumasi)
• 0244-584516
A visit to an illegal Money Operator in Ghana
To better experience and understand the informal money transfer processes, some monies
were actually sent from UK and Netherland to Ghana for a researcher to retrieve through
‘money transfer agents’ in Ghana.
A visit to some selected ‘shops’ acting as ‘money transfer agents” along some major
business/trading locations in Accra pretending to be interested in sending or receiving
money revealed the following;
At an Automobile spare parts shop on the Darkuman – Kokompe road, it seemed difficult if
not impossible to imagine there could be a money transfer or remittance service or agency
among the stretch of auto spare parts shops off that road. While it’s front-end activity is
obvious to the public, its back-end activity may only be known to the users of the service. At
darkuman, the centre transfers and receives money between Ghana and three European
countries of Holland, UK and Germany. They are able to receive and pay any amount of
money but are unable to pay in one lump sum if the amount is huge as anything above 50
thousand euro. Their commission rate is 2% of the value and is prepared to pay in any
chosen currency as required by the client if the sum is above 50,000 euro.
In Accra, most of the pseudo shops/remittance centers visited said they only receive
transfers from the 3 above named European countries. Only two centers out of the six
visited said they had USA as part of the countries where they received and sent remittances.
Commission rates ranged from 2% to 4%. Also, of the two centers, that send and receive
transfers between Ghana and USA, one said it could comfortably pay any amount due a
client irrespective of the chosen currency and amount involved. The other centre said it
52
needed a maximum of 30 days to make a full payment for any sum larger than 200 thousand
euro.
Of all the centers’ visited, only two had advertised signage’s even though they bore no
resemblance to the front-end or back-end activities the centers’ indulged. While two of the
shops visited had visible signs of seemingly offering other services, the remaining four
basically had desks and chairs with some computers and telephones.
Also of note, none of the places visited enquired for any mode of identification before
accessing the amount transferred. All that one needs is a secret code, the amount and the
amount is released. Again, one may have to forfeit the transferred sum if it is not accessed
within days of sending as it was experienced by one researcher at a location in Kumasi.
53
CHAPTER FOUR
4.0
Recommendations
Continue to promote formal transfer methods and act against illegal methods
•
Continue in the drive to increase transparency and competition in the formal market
through current and future campaigns/projects and advertise with regards to
the
risk
of
the
illegal
market
in community media. Ghanaian regulatory
authorities should take positive enforcement action where appropriate against
known illegal operators. In addition, it is believed that many of the illegal
transactions in Ghana are paid out at markets using sterling currency that is hand
carried by the people into Ghana. It is believed that airline crew may be involved in
this practice. Some further investigation in Ghana may help in this regard.
Guidance on the limit for ID Requirements
•
There is some inconsistency with regard to the threshold for ID requirements
amongst UK providers. The current model is based on an out of date Euro-Sterling
conversion rate and the exact figure varies between operators (between £0 for
banks and £600 - £750 for MTOs). The threshold should not be lowered significantly
as this will drive a percentage of consumers away from the formal market.
Abolition of Exchange Controls
•
In line with the philosophy behind the Foreign Exchange Act 2006, the Bank of
Ghana should work towards abolishing exchange controls in Ghana, similar to the
situation in the Gambia, the UK and Singapore. His will mean the removal of the
distinction between the foreign exchange account and the foreign currency
account that currently exists in Ghana under the central bank’s regulations. This
should, however, be done as a compliment to changes in our trade and
investment policy, as well. If we remove exchange controls without opening up
the trade and investment regime to encourage FDI and generally give people the
54
confidence to bring in foreign exchange into Ghana, the benefits may be limited,
with more forex outflows than inflows. In line with this, Government should take
another look at its decision to discontinue with the process of making Ghana a
centre for international financial services, a potentially multi-billion dollar
investments and savings area, while at the same time focusing on
institutionalizing the
internationally-approved
instruments and
structures
necessary to check against money laundering. If the liberalization of the forex was
done along with the vibrancy and checks recommended for the trade and
investment areas, there should be no problem with our next recommendation
below.
Open remittance services to other outlets
•
Regulation by the Bank of Ghana means that the remittance outlets are dominated
by banks (and the Post Office) and do not reach the rural areas. A change in the
regulations to open up the remittance service to other outlets – i.e. retail outlets and
Ghana Post which would significantly improve access in rural areas. Since the ability
of banks to enter into exclusive contracts was abolished, a few banks have signed
with other operators and provide receivers with a choice. However, this does not
address the lack of rural access and hence enabling retail locations to offer payout
and other services would be desirable
Allow MTOs to transmit money out of Ghana
•
The limitation on transfers by MTOs has historically been because of capital flight
and its implications for the depreciation of the exchange rate. The Bank of Ghana
currently does not allow MTOs to send funds out of Ghana. It is understood that the
Bank of Ghana wishes to control foreign currency that is sent out of the country but
a number of the MTOs felt that if this were allowed then it would result in
improvements in the country. Permitting Ghana MTOs to transmit money will open
up a new agent network, new outlets in Ghana, assist in financial inclusion and help
financial literacy.
55
More facilities in Ghana
•
In fact, the results of the research from the UK show that even licensed MTOs
engage in illegal money transfers. The MTOs should actively pursue agency
relationships with the banks in Ghana so that they can leverage on their wider
geographical network. Western Union has taken the lead on this front with the new
arrangements with all the existing rural banks in Ghana. ATMs, Visa and MasterCard
are not widely used in Ghana, especially outside of the main cities. The E-zwich
system offers a vast opportunity for international MTOs, as well. The adoption of
internet banking by the rural banks will alow new money transfer methods which
rely on this type of banking facility and the associated money transfer options. The
Central Bank should encourage banks to provide more facilities throughout the
country to make the adoption and absorption of these banking facilities more
common and widespread. This will help improve the technological advancement and
development of the money transfer market and reduce problems to do with the
time taken to collect remittances by recipients.
Use the Ghanaian Diaspora to educate those in Ghana
•
The Ghanaian Diaspora is fairly well educated, especially with regards to newer
technologies (internet and mobile phones) and financial literacy and services. Use
dissemination techniques to provide information to the Diaspora. Develop new
products and services and improve the money transfer and financial systems in
Ghana. Once these products are available then a full scale communication initiative
can be undertaken. Initiatives that use the European based Ghanaian community to
educate the Ghanaian’s back home about financial services and new products can
have real benefits. Thought needs to be given as to which messages are best suited
to using this channel.
•
An abolition of exchange controls as we have in the Gambia, Singapore, or the UK.
This will mean the removal of the distinction between the foreign exchange account
and the foreign currency account that currently exists in Ghana under BOG
56
regulations. This should however be done as a complement to changes in our trade
and investment policy as well. If the Bank of Ghana was remove the exchange
controls without opening up the trade and investment regime to encourage FDI and
generally give people the confidence to bring in forex into Ghana, the benefits may
be limited, with more forex outflows than inflows. However, if the liberalization of
the forex was done along with the trade and investment regime, there would be no
problem with the MTOs doing external transfers.
To conclude, improvements should be made to make it easier for non-financial retail
networks, in rural areas especially, to be able to offer remittance services (as
agents of banks or money transfer companies), for the reliable shops in the rural area
to be able to offer additional money transfer services and for money transfer companies
to be able to transfer money outside of Ghana. Additionally, the Bank of Ghana should
make extensive efforts to explain and enforce the current regulations under the Foreign
Exchange Act 2006. Finally, an enabling environment should be created to ensure that
there is a deeper penetration of the E-zwich platform, ATMs and point-of-sale
systems throughout the country and particularly in rural areas.
57
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